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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
JACOR COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4832 31-0978313
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
50 EAST RIVERCENTER BOULEVARD, 12TH FLOOR
COVINGTON, KENTUCKY 41011
(606) 655-2267
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
R. CHRISTOPHER WEBER
JACOR COMMUNICATIONS, INC.
50 EAST RIVERCENTER BOULEVARD, 12TH FLOOR
COVINGTON, KENTUCKY 41011
(606) 655-2267
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES OF COMMUNICATIONS TO:
RICHARD G. SCHMALZL, ESQ. NEIL GANULIN, ESQ.
GWEN M. MORRIS, ESQ. Frost & Jacobs
Graydon, Head & Ritchey 2500 PNC Center
1900 Fifth Third Center 201 East Fifth Street
Cincinnati, Ohio 45202 Cincinnati, Ohio 45202
(513) 621-6464 (513) 651-3836 (fax) (513) 651-6800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and the effective time of the purchase of certain assets
("Acquisition") of Secret Communications Limited Partnership ("Secret") by Jacor
Broadcasting Corporation ("JBC"), a wholly owned subsidiary of Jacor
Communications, Inc. ("Jacor") pursuant to the Assets Purchase Agreement dated
as of April 24, 1997, by and between JBC and Secret (the "Purchase Agreement")
as described in the enclosed Prospectus/Information Statement included as Part I
of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE FEE(1)
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share..... 750,000 N/A $31,312,500.00 $9,488.64
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee. In
accordance with Rule 457(c) under the Securities Act of 1933, as amended,
the registration fee for the shares of Jacor common stock, par value $.01
per share, to be issued in connection with the Acquisition was computed on
the basis of the the average of the high and low prices reported on the
Nasdaq Stock Market's National Market of the Jacor Common Stock to be issued
in the Acquisition as of July 11, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 18, 1997
PROSPECTUS OF JACOR COMMUNICATIONS, INC.
INFORMATION STATEMENT OF
SECRET COMMUNICATIONS LIMITED PARTNERSHIP
This Prospectus/Information Statement relates to the proposed purchase
("Acquisition") by Jacor Broadcasting Corporation, an Ohio corporation ("JBC")
and wholly owned subsidiary of Jacor Communications, Inc. ("Jacor"), of certain
assets ("Stations Assets") relating to WLTF(FM) and WTAM(AM) (the "Stations"),
radio stations owned and operated by Secret Communications Limited Partnership
("Secret"), pursuant to the Assets Purchase Agreement dated as of April 24,
1997, by and between JBC and Secret ("Purchase Agreement").
This Prospectus/Information Statement is being furnished to the partners of
Secret in connection with the issuance of the shares of Jacor common stock, $.01
par value ("Jacor Common Stock"), pursuant to the Purchase Agreement.
A copy of the Purchase Agreement is included as Appendix I to this
Prospectus/Information Statement.
This Prospectus/Information Statement also constitutes a prospectus of Jacor
filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
750,000 shares of Jacor Common Stock to be issued in connection with the
Acquisition pursuant to the Purchase Agreement. Jacor will file an application
with the Nasdaq Stock Market's National Market (the "Nasdaq National Market")
seeking approval for quotation on the Nasdaq National Market of the Jacor Common
Stock to be issued in connection with the Acquisition. Under Delaware Law, the
Acquisition does not require the approval of the Jacor stockholders.
The Purchase Agreement provides that in consideration for the sale of the
Stations Assets to JBC, (i) Secret shall receive $23,968,750, subject to certain
adjustments as described below (the "Cash Consideration") and (ii) Secret or the
partners of Secret as determined by Secret in its sole discretion shall receive
an aggregate of 750,000 shares of Jacor Common Stock (the "Stock
Consideration"). Secret has determined that the Stock Consideration will be paid
to the partners of Secret. In the event that subsequent to the date of the
Purchase Agreement and prior to the closing of the transactions contemplated by
the Purchase Agreement (the "Closing Date"), Jacor shall pay a dividend in Jacor
Common Stock, subdivide Jacor Common Stock into a larger number of shares or
combine Jacor Common Stock into a smaller number of shares, there shall be a
proportional adjustment in the number of shares of Jacor Common Stock to be
distributed to the partners of Secret.
Except as otherwise provided in the Purchase Agreement, all deposits,
reserves and prepaid and deferred income and expenses relating to the Stations
Assets or the Assumed Liabilities (as defined in the Purchase Agreement) and
arising from the conduct of business and operations of the Stations shall be
prorated between JBC and Secret in accordance with generally accepted accounting
principles as of 11:59 p.m., Eastern Standard Time, on the date immediately
preceding the Closing Date.
SEE "RISK FACTORS" AT PAGE 14 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED REGARDING THE SECURITIES OFFERED HEREBY.
------------------------
SECRET IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A
PROXY TO SECRET.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS/INFORMATION STATEMENT IS , 1997.
<PAGE>
THIS PROSPECTUS/INFORMATION STATEMENT IS FIRST BEING MAILED OR DELIVERED
TO THE PARTNERS OF SECRET ON OR ABOUT , 1997
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/INFORMATION
STATEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS/INFORMATION STATEMENT
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE,
THE SECURITIES OFFERED BY THIS PROSPECTUS/ INFORMATION STATEMENT, IN ANY
JURISDICTION, TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS/ INFORMATION STATEMENT NOR ANY DISTRIBUTION OF
SECURITIES PURSUANT TO THIS PROSPECTUS/INFORMATION STATEMENT SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS PROSPECTUS/INFORMATION
STATEMENT.
AVAILABLE INFORMATION
Jacor is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and accordingly files
reports, proxy statements, and other information with the Commission. Such
reports, proxy statements and other information filed with the Commission are
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and at 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such documents may also be obtained from the Public Reference Room of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Jacor files its reports, proxy statements, and other
information with the Commission electronically, and the Commission maintains a
Web site located at http://www.sec.gov containing such information.
This Prospectus/Information Statement does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
Registration Statement, including any amendments, schedules, and exhibits
thereto, is available for inspection and copying as set forth above. Statements
contained in this Prospectus/ Information Statement as to the contents of any
contract or other document referred to herein include all material terms of such
contracts or other documents but are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
Jacor Common Stock is traded on the Nasdaq National Market. Reports, proxy
and information statements, and other information concerning Jacor are available
for inspection and copying at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006-1506. Application has been made to list on
the Nasdaq National Market the Jacor Common Stock to be issued in connection
with the Acquisition. Secret is a privately held company and is not subject to
the information requirements or proxy rules contained in or adopted pursuant to
the Exchange Act.
All information contained in this Prospectus/Information Statement relating
to Jacor has been supplied by Jacor and all information relating to Secret has
been supplied by Secret. Neither Jacor nor Secret assumes any responsibility for
the accuracy or completeness of the information provided by the other.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AVAILABLE INFORMATION.................................................................................... 2
TABLE OF CONTENTS........................................................................................ 3
PROSPECTUS/INFORMATION STATEMENT SUMMARY................................................................. 5
Parties to the Acquisition............................................................................. 5
Authorization by Secret and Jacor...................................................................... 5
The Acquisition........................................................................................ 6
Consideration.......................................................................................... 6
Reasons for the Acquisition............................................................................ 6
Termination; Termination Remedies...................................................................... 7
Financing Arrangements................................................................................. 7
Interests of Certain Persons in the Acquisition........................................................ 7
Regulatory Matters..................................................................................... 7
Nasdaq Listing......................................................................................... 8
Certain Federal Income Tax Consequences................................................................ 8
Accounting Treatment................................................................................... 8
Recent Developments.................................................................................... 8
Summary Unaudited Pro Forma Financial Information...................................................... 9
Summary Historical Financial Data...................................................................... 11
Per Share Data......................................................................................... 12
Market Prices and Dividends............................................................................ 12
RISK FACTORS............................................................................................. 14
AUTHORIZATION BY SECRET AND JACOR........................................................................ 16
THE ACQUISITION.......................................................................................... 17
Background of and Reasons for the Acquisition.......................................................... 17
Delivery of Consideration.............................................................................. 17
Certain Terms of the Purchase Agreement and Related Agreements......................................... 17
Financing Arrangements................................................................................. 23
Interests of Certain Persons in the Merger............................................................. 24
Regulatory Matters..................................................................................... 25
Nasdaq Listing......................................................................................... 25
Certain Federal Income Tax Consequences................................................................ 25
Accounting Treatment................................................................................... 26
Federal Securities Law Consequences.................................................................... 26
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................................................ 28
SELECTED HISTORICAL FINANCIAL DATA OF JACOR.............................................................. 34
SELECTED HISTORICAL FINANCIAL DATA OF THE STATIONS....................................................... 36
BUSINESS OF JACOR........................................................................................ 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF JACOR.................................. 61
BUSINESS OF THE STATIONS................................................................................. 65
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF JACOR........... 66
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE STATIONS.... 72
RIGHTS OF STOCKHOLDERS................................................................................... 73
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DESCRIPTION OF JACOR CAPITAL STOCK....................................................................... 74
Common Stock........................................................................................... 74
Class A and Class B Preferred Stock.................................................................... 75
Citicasters Warrants................................................................................... 75
Regent Warrants........................................................................................ 77
Registrar and Transfer Agent........................................................................... 79
DESCRIPTION OF OTHER JACOR INDEBTEDNESS.................................................................. 79
1996 10 1/8% Notes..................................................................................... 79
Liquid Yield Option-TM- Notes.......................................................................... 80
1996 9 3/4% Notes...................................................................................... 81
1997 8 3/4% Notes...................................................................................... 82
LEGAL MATTERS............................................................................................ 83
EXPERTS.................................................................................................. 83
INDEX TO FINANCIAL STATEMENTS............................................................................ F-1
ANNEX I ASSETS PURCHASE AGREEMENT.................................................................... A-I-1
ANNEX II FORM OF REGISTRATION RIGHTS AGREEMENT........................................................ A-II-1
</TABLE>
4
<PAGE>
PROSPECTUS/INFORMATION STATEMENT SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN MATTERS DISCUSSED ELSEWHERE IN THIS
PROSPECTUS/INFORMATION STATEMENT. THIS SUMMARY SETS FORTH ALL MATERIAL ELEMENTS
OF SUCH MATTERS BUT DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION APPEARING IN THIS
PROSPECTUS/ INFORMATION STATEMENT AND THE ANNEXES HERETO. PARTNERS OF SECRET ARE
URGED TO READ THIS PROSPECTUS/INFORMATION STATEMENT AND THE ANNEXES HERETO IN
THEIR ENTIRETY. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM (I) "JACOR"
REFERS TO JACOR COMMUNICATIONS, INC. AND ITS SUBSIDIARIES AND THEIR COMBINED
OPERATIONS ON A HISTORICAL BASIS; AND (II) "COMPANY" REFERS TO JACOR, THE
ENTITIES, RADIO STATIONS AND OTHER ASSETS TO BE OWNED BY JACOR ASSUMING THE
PENDING TRANSACTIONS ARE CONSUMMATED AS CURRENTLY SET FORTH IN THE RESPECTIVE
TRANSACTION AGREEMENTS. THE TERM "PENDING TRANSACTIONS" REFERS TO THE
ACQUISITION AND TO THE PENDING ACQUISITIONS, DISPOSITIONS AND EXCHANGES
DESCRIBED UNDER "BUSINESS OF JACOR--PENDING RADIO STATION TRANSACTIONS."
PARTIES TO THE ACQUISITION
JACOR. Jacor, upon consummation of the Pending Transactions, will be the
third largest radio group in the nation as measured by revenue and will be the
country's fourth largest provider of syndicated radio programming. Jacor's
strategic objective is to maximize revenue and broadcast cash flow by becoming
the leading radio broadcaster in geographically diverse broadcast areas and by
leveraging its expertise in programming, production, syndication and
distribution.
The Company will own and/or operate 153 radio stations and one television
station in 33 broadcast areas across the United States upon consummation of the
Pending Transactions. The Company's broadcast areas, as a group, are among the
most attractive in the country, demonstrating radio revenue growth in excess of
the radio industry average over the last five years. Jacor also produces 54
syndicated programs and services for more than 4,000 radio stations, which
programs include RUSH LIMBAUGH and DR. DEAN EDELL, the number one and number
three rated radio programs in the United States, respectively. See "BUSINESS OF
JACOR."
JBC. JBC is a wholly-owned subsidiary of Jacor. JBC owns and/or operates
the following radio stations located in Ohio: (i) in Cincinnati: WLW-AM,
WEBN-FM, WOFX-FM, WCKY-AM, WAQZ-FM, WAZU-AM, WSAI-AM; (ii) in Lima: WIMA-FM,
WIMT-FM, WBUK-AM, WLVZ-FM; and (iii) in Toledo: WCWA-AM, WIOT-FM.
The mailing address and telephone number of the principal executive offices
of Jacor and JBC are 50 East RiverCenter Boulevard, 12th Floor, Covington,
Kentucky 41011 and (606) 655-2267.
SECRET. Secret is a Delaware limited partnership engaged primarily in radio
broadcasting. Secret has two general partners, one of which is a corporation and
the other of which is a limited partnership, and one individual limited partner.
As of the date hereof, Secret has sold or has entered into agreements to sell
all of the radio stations that it owns, including the stations whose assets are
being sold pursuant to the Purchase Agreement. The mailing address and telephone
number of the principal executive offices of Secret are 312 Walnut Street, Suite
3550, Cincinnati, Ohio 45202, (513) 621-1600. See "BUSINESS OF SECRET."
AUTHORIZATION BY SECRET AND JACOR
The Purchase Agreement has been approved by the general partners of Secret
subject to the effective registration of the Stock Consideration and the receipt
by all partners of Secret of the Prospectus/ Information Statement and the
satisfaction of the conditions to closing set forth in the Purchase Agreement.
No further action by the partners of Secret is necessary to effect the
Acquisition. ACCORDINGLY, SECRET IS NOT ASKING PARTNERS FOR A PROXY AND PARTNERS
OF SECRET ARE REQUESTED NOT TO SEND A PROXY.
5
<PAGE>
The Purchase Agreement also has been approved by the Boards of Directors of
Jacor and JBC. The Purchase Agreement and the Acquisition do not require the
approval of the Jacor stockholders under Delaware law. No additional corporate
action by Jacor or JBC will be required to effect the Acquisition. See
"AUTHORIZATION BY SECRET AND JACOR."
THE ACQUISITION
The Acquisition will be consummated and become effective within five (5)
business days after the later to occur of: (a) the satisfaction or waiver of the
conditions to the Acquisition as set forth in the Purchase Agreement, and (b)
the issuance of a Final Order (as defined in the Purchase Agreement) by the
Federal Communications Commission ("FCC"); provided, however, that JBC may in
its sole discretion waive the requirement that a Final Order be issued and elect
(subject to the satisfaction or waiver of conditions) to close at any time (upon
not less than five (5) business days notice to Secret) after the release of the
initial FCC approval on public notice that it has consented to the transaction
contemplated by the Purchase Agreement (the "Closing"). See "THE
ACQUISITION--Certain Terms of the Purchase Agreement and Related Agreements."
CONSIDERATION
The Purchase Agreement provides that in consideration for the sale of the
Stations Assets to JBC, (i) Secret shall receive Cash Consideration consisting
of $23,968,750, subject to certain adjustments as described below and (ii)
Secret or the partners of Secret as determined by Secret in its sole discretion
shall receive Stock Consideration consisting of an aggregate of 750,000 shares
of Jacor Common Stock. Secret has determined that the Stock Consideration will
be paid to the partners of Secret. In the event that subsequent to the date of
the Purchase Agreement and prior to the Closing Date, Jacor shall pay a dividend
in Jacor Common Stock, subdivide Jacor Common Stock into a larger number of
shares or combine Jacor Common Stock into a smaller number of shares, there
shall be a proportional adjustment in the number of shares of Jacor Common Stock
to be distributed to the partners of Secret.
Except as otherwise provided in the Purchase Agreement, all deposits,
reserves and prepaid and deferred income and expenses relating to the Stations
Assets or the Assumed Liabilities (as defined in the Purchase Agreement) and
arising from the conduct of business and operations of the Stations shall be
prorated between JBC and Secret in accordance with generally accepted accounting
principles as of 11:59 p.m., Eastern Standard Time, on the date immediately
preceding the Closing Date.
REASONS FOR THE ACQUISITION
JACOR. Since 1993, Jacor has been actively seeking to expand through
acquisitions and has identified potential acquisition and merger candidates.
Since the enactment of the Telecommunications Act of 1996 (the "TeleCom Act") on
February 8, 1996, through July 15, 1997, Jacor has acquired or entered into
agreements to acquire 130 radio stations and two television stations and entered
into an exclusive sales agency agreement to provide programming to and sell air
time for two radio stations located in Baja California, Mexico. Jacor has also
disposed or agreed to dispose of nine radio stations. In addition, Jacor has
exchanged one of the television stations and three radio stations for 11 radio
stations and has entered into an agreement to exchange four Kansas City radio
stations for six radio stations in Dayton, Ohio. Jacor also acquired a leading
provider of syndicated talk radio programming, a leading provider of satellite
and network services for the radio broadcasting industry and a leading provider
of traffic reporting services in the San Diego and Los Angeles broadcast areas.
Jacor continues to negotiate for additional acquisitions in its existing
locations and new locations.
SECRET. The TeleCom Act loosened the restrictions on how many stations one
could own in a given market, and eliminated the restrictions on how many
stations one could own nationwide. These relaxed restrictions effectively
increased the number of potential buyers for any given station, which had the
effect
6
<PAGE>
of increasing the value of radio stations in general. As a result, the investors
of Secret determined that through a rational and selective disposition of its
radio stations they would be able to realize a targeted return on their
investment in Secret. Secret has embarked on such a plan of disposing of its
holdings in radio stations, and this present transaction is part of that plan.
TERMINATION; TERMINATION REMEDIES
The Purchase Agreement may be terminated before the consummation of the
Acquisition by either JBC or Secret under various circumstances, including the
failure to consummate the Acquisition on or before March 1, 1998. If Secret
fails to perform under the provisions of the Purchase Agreement, JBC shall be
entitled to specific performance of the terms of the Purchase Agreement in
addition to any other remedies. If any action is brought by JBC to enforce the
Purchase Agreement, Secret shall waive the defense that there is an adequate
remedy at law. If the parties fail to consummate the Purchase Agreement on the
Closing Date solely due to JBC's material breach of the Purchase Agreement and
Secret is not at that time in material breach of the Purchase Agreement, Secret
shall be entitled to obtain specific performance of the terms of the Purchase
Agreement in addition to any other remedies.
FINANCING ARRANGEMENTS
Jacor expects that the funds necessary to pay the Cash Consideration will be
obtained from borrowings under its June 1996 credit facility, as amended and
restated in February 1997 (the "Credit Facility"), and/or cash on hand which
includes proceeds from the May 1997 offerings by Jacor of 7,647,500 shares of
Common Stock to the public and 673,628 shares of Common Stock to affiliates of
Equity Group Investments, Inc., an affiliate of the Zell/Chilmark Fund L.P.
(collectively, the "1997 Equity Offerings") and the June 1997 offering by Jacor
Communications Company ("JCC"), a wholly owned subsidiary of Jacor, of 8 3/4%
Senior Subordinated Notes due 2007 (the "1997 8 3/4% Notes Offering"). See "THE
ACQUISITION--Financing Arrangements."
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
Other than the limited partner's ownership of the limited partnership
interests in Secret, the officers and members of the management committee of
Secret do not have any additional interests in the Acquisition.
In connection with the Purchase Agreement, Jacor and JBC will enter into a
Registration Rights Agreement with Secret and certain of its partners which
provides that Jacor will register for resale the shares of Jacor Common Stock
comprising the Stock Consideration issued to the partners of Secret if a partner
is unable to sell the shares without registration. See "FEDERAL SECURITIES LAWS
CONSEQUENCES."
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals is required in order to consummate the Acquisition, including the
consent and approval of the FCC and the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). JBC and Secret have agreed in the Purchase
Agreement to use their reasonable best efforts to obtain such approvals or
waivers, but there can be no assurance as to when or if such approvals or
waivers will be obtained such that the Acquisition may be consummated. As of the
date hereof, the applicable waiting period under the HSR Act has terminated and
the FCC has issued an Initial Order approving the Acquisition. See "THE
ACQUISITION--Regulatory Matters."
7
<PAGE>
NASDAQ LISTING
Jacor will use its reasonable best efforts to cause the shares of Jacor
Common Stock comprising the Stock Consideration to be listed for trading on the
Nasdaq National Market. See "THE ACQUISITION--Nasdaq Listing."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes the Acquisition will be considered a taxable
transaction to Secret and its partners. Gain or loss to Secret and its partners
on the disposition of the Stations Assets will be measured by the difference
between the amount realized by Secret and Secret's tax basis in the Stations
Assets. The amount realized by Secret will be the sum of the Cash Consideration
and the fair market value of the Stock Consideration on the Closing Date. The
amount realized will be allocated to each of the Stations' Assets based on the
allocation agreed to by Secret and JBC pursuant to the Purchase Agreement.
For purposes of Section 1231 of the Internal Revenue Code, the Stations
Assets will be considered as property used in the trade or business. In
determining whether the gains or losses on the disposition of the Stations
Assets will be considered as gains or losses from the sale or exchange of
capital assets, Section 1231 will apply separately to each of the partners of
Secret. The disposition of certain of the Stations Assets will also be subject
to Sections 1245 and 1250 of the Internal Revenue Code, which may have the
effect of requiring a portion of any gain realized by Secret and its partners to
be treated as ordinary income.
The shares of Jacor Common Stock received by the partners of Secret in the
Acquisition will have a tax basis for federal income tax purposes in their hands
equal to the fair market value of such shares on the Closing Date. The holding
period for the shares in the hands of the partners of Secret will begin on the
Closing Date.
ALL SECRET PARTNERS SHOULD READ CAREFULLY THE DISCUSSION IN THE "THE
ACQUISITION--CERTAIN FEDERAL INCOME TAX CONSEQUENCES" AND ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO SPECIFIC CONSEQUENCES TO THEM OF THE ACQUISITION
UNDER FEDERAL, STATE, LOCAL OR ANY OTHER APPLICABLE TAX LAWS.
ACCOUNTING TREATMENT
The Acquisition will be accounted for as a "purchase," as such term is used
under generally accepted accounting principles. See "THE ACQUISITION--Accounting
Treatment."
RECENT DEVELOPMENTS
Since the enactment of the Telecom Act on February 8, 1996, through July 15,
1997, Jacor has acquired and entered into binding agreements to acquire 130
radio stations, two television stations and entered into an exclusive sales
agency agreement to provide programming to and sell air time for two radio
stations located in Baja California, Mexico. The aggregate consideration
provided by Jacor in these transactions was approximately $1.5 billion. Jacor
has also disposed or agreed to dispose of nine radio stations for approximately
$75.0 million. In addition, Jacor has exchanged one of the television stations
and three radio stations for 11 radio stations in transactions valued in the
aggregate at approximately $245.0 million and has entered into an agreement to
exchange four Kansas City radio stations for six radio stations in Dayton, Ohio
valued at approximately $70.0 million. Jacor has also entered into a non-binding
letter of intent to exchange one station in one of Jacor's existing broadcast
areas for another station in that same broadcast area in a transaction that
would be valued at approximately $4.5 million. Jacor also acquired for
approximately $79.0 million a leading provider of syndicated talk radio
programming, a leading provider of satellite and network services for the radio
broadcasting industry and a leading provider of traffic reporting services in
the San Diego and Los Angeles broadcast areas.
8
<PAGE>
In addition, Jacor has acquired Premiere Radio Networks, Inc., a creator,
producer and distributor of radio programming, research and other services, for
approximately $189.8 million (the "Premiere Merger"). Pursuant to other pending
transactions (the "Pending Transactions"), Jacor will acquire 24 radio stations
for a purchase price aggregating approximately $95.0 million (including $24.6
million already advanced by Jacor to fund various escrow deposits and loans).
Jacor has entered into two non-binding letters of intent and one binding letter
of intent pursuant to which Jacor and the prospective sellers have agreed to
negotiate exclusively the terms and conditions of definitive acquisition
agreements. If such negotiations and transactions are successfully completed,
Jacor would acquire an additional five radio stations for an aggregate purchase
price of approximately $6.5 million. Jacor is currently negotiating additional
possible acquisitions each of which may or may not result in additional
acquisitions. Jacor is also engaged in preliminary discussions with owners of
numerous other broadcasting businesses. Such transactions, if any, may involve
the payment of cash, shares of Common Stock and/or the exchange of the Company's
other broadcast properties. However, there can be no assurance that Jacor will
successfully complete all or any such transactions or what the consequences
thereof would be. For more information about Jacor's recent acquisitions and
dispositions, see "BUSINESS OF JACOR."
For a discussion of the risks associated with Jacor's growth strategy, see
"RISK FACTORS" beginning on page 14.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following sets forth summary unaudited pro forma combined financial
information derived from the Unaudited Pro Forma Financial Information included
elsewhere in this Prospectus/Information Statement. The unaudited pro forma
condensed consolidated statements of operations for the year ended December 31,
1996, and the latest twelve months ("LTM") ended March 31, 1997, give effect to
each of the following transactions as if such transactions had been completed
January 1, 1996: (i) the 1997 Equity Offerings and the 1997 8 3/4% Notes
Offering, (ii) the Premiere Merger, (iii) the EFM Acquisition, (iv) Jacor's 1996
acquisitions of Citicasters Inc. ("Citicasters") and Noble Broadcast Group, Inc.
("Noble"), the acquisition of the Selected Gannett Radio Stations (as defined
herein) and the Tampa Television Station divestiture, and other immaterial
acquisitions completed in 1996, (v) Jacor's 1997 acquisition of Regent
Communications, Inc. ("Regent") and other 1997 immaterial acquisitions,
including the Acquisition, both completed and pending as of April 30, 1997 ((iv)
and (v) collectively, the "Other Acquisitions"). The pro forma condensed
consolidated balance sheet as of March 31, 1997 has been prepared as if the
Acquisition and other transactions pending as of April 30, 1997 (not including
immaterial acquisition agreements entered into by Jacor after April 30, 1997)
had occurred on March 31, 1997. This Acquisition is not considered a significant
transaction for purposes of the pro forma financial information and is therefore
not separately reflected in the pro forma financial statements.
The Summary Unaudited Pro Forma Financial Information does not purport to
present the actual financial position or results of operations of Jacor had the
transactions and events assumed therein in fact occurred on the dates specified,
nor are they necessarily indicative of the results of operations that may be
achieved in the future. The Summary Unaudited Pro Forma Financial Information is
based on certain assumptions and adjustments described in the notes to the
Unaudited Pro Forma Financial Information and should be read in conjunction
therewith. See the Consolidated Financial Statements and the Notes thereto for
Jacor and the Stations' Combined Financial Statements included herein.
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED LTM ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue................................................................. $ 523,169 $ 533,627
Broadcast operating expenses................................................ 359,793 368,124
Depreciation and amortization............................................... 87,215 88,020
Corporate general and administrative expenses............................... 9,108 10,190
Operating income............................................................ 64,750 64,990
Interest expense............................................................ 75,487 75,487
OTHER FINANCIAL DATA:
Broadcast cash flow(1)...................................................... $ 163,376 $ 165,503
Broadcast cash flow margin(2)............................................... 31.2% 31.0%
EBITDA(1)................................................................... $ 154,268 $ 155,313
Cash interest expense....................................................... 66,386 66,386
Capital expenditures........................................................ 13,102 14,687
CREDIT RATIOS(3):
Ratio of EBITDA to cash interest expense.................................... 2.3x 2.3x
Ratio of long term debt (net of cash) to EBITDA............................. 5.1x 5.1x
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1997
--------------
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................................. $ 39,731
Intangible assets............................................................................... 1,970,354
Total assets.................................................................................... 2,348,212
Long-term debt, including current portion....................................................... 798,000
Liquid Yield Option Notes....................................................................... 120,183
Total shareholders' equity...................................................................... 912,827
</TABLE>
- ------------------------
(1) "Broadcast cash flow" means operating income before depreciation and
amortization, and corporate general and administrative expenses. "EBITDA"
means operating income before depreciation and amortization. Broadcast cash
flow and EBITDA should not be considered in isolation from, or as a
substitute for, operating income, net income or cash flow and other
consolidated income or cash flow statement data computed in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. Although these measures of performance are not
calculated in accordance with generally accepted accounting principles, they
are widely used in the broadcasting industry as a measure of a company's
operating performance because they assist in comparing station performance
on a consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance. Pro forma EBITDA excludes $2,303 of special
bonuses.
(2) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
(3) The pro forma credit ratio reflects the cash and long term debt of Jacor as
of March 31, 1997 as adjusted to give effect to the 1997 Equity Offerings,
the 1997 8 3/4% Notes Offering and the application of the proceeds therefrom
to reduce outstanding indebtedness under the Credit Facility to the extent
permitted thereunder.
10
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following sets forth summary historical financial data for Jacor and the
Stations for the three years ended December 31, 1996 and the three month periods
ended March 31, 1996 and 1997. The comparability of the historical consolidated
financial data reflected in this financial data has been significantly impacted
by acquisitions and dispositions. The information presented below is qualified
in its entirety by, and should be read in conjunction with, "SELECTED HISTORICAL
FINANCIAL DATA OF JACOR" and the Consolidated Financial Statements and the Notes
thereto for Jacor, and "SELECTED HISTORICAL FINANCIAL DATA OF THE STATIONS"
included herein.
HISTORICAL
(DOLLARS IN THOUSANDS)
JACOR
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue........................................ $ 107,010 $ 118,891 $ 223,761 $ 30,074 $ 88,828
Broadcast operating expenses....................... 80,468 87,290 151,056 23,870 67,305
Depreciation and amortization...................... 9,698 9,483 23,404 2,619 13,369
Corporate general and
administrative expenses.......................... 3,361 3,501 7,629 1,139 2,762
Operating income................................... 13,483 18,617 39,360 2,446 5,392
Net income......................................... 7,852 10,965 5,105 891 (8,140)
OTHER FINANCIAL DATA
Broadcast cash flow................................ $ 26,542 $ 31,601 $ 72,696 $ 6,203 $ 21,523
Broadcast cash flow margin......................... 24.8% 26.6% 32.5% 20.6% 24.2%
EBITDA............................................. $ 23,181 $ 28,100 $ 62,764 $ 5,064 $ 18,761
Capital expenditures............................... $ 2,221 $ 4,969 $ 11,852 $ 3,437 $ 4,860
</TABLE>
STATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue........................................ $ 9,253 $ 9,415 $ 9,720 $ 1,838 $ 1,807
Broadcast operating expenses....................... 7,054 7,534 7,775 2,085 1,776
Depreciation and amortization...................... 1,089 1,155 1,054 265 278
Corporate general and administrative expenses...... 649 644 713 146 244
Operating income................................... 462 81 178 (659) (491)
Interest expense................................... 713 637 540 135 126
Net income......................................... (296) (101) (405) (804) (628)
OTHER FINANCIAL DATA
Broadcast cash flow................................ $ 2,200 $ 1,880 $ 1,945 $ (248) $ 31
Broadcast cash flow margin......................... 24% 20% 20% -13% 2%
EBITDA............................................. $ 1,551 $ 1,236 $ 1,232 $ (393) $ (213)
Capital expenditures............................... $ 235 $ 328 $ 156 $ 15 $ 25
</TABLE>
11
<PAGE>
PER SHARE DATA
Set forth below are historical earnings (loss) per share before
extraordinary items, cash dividends per share and book value per share data of
Jacor and unaudited pro forma per share data of the combined companies. The data
set forth below should be read in conjunction with Jacor's audited financial
statements and the Stations' financial statements, including the notes thereto,
which are included in this Prospectus/Information Statement. The data should
also be read in conjunction with the unaudited pro forma combined condensed
financial statements, including the notes thereto, included elsewhere in this
Prospectus/Information Statement.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ---------------
<S> <C> <C>
HISTORICAL:
Earnings per share............................................................ $ 0.30 $ (0.08)
Cash dividends per share...................................................... -- --
Book value per share.......................................................... $ 15.56 $ 17.10
PRO FORMA:
Loss per share................................................................ $ (0.09) $ (0.16)
Cash dividends per share...................................................... -- --
Book value per share.......................................................... N/A $ 20.11
</TABLE>
MARKET PRICES AND DIVIDENDS
Secret is a privately held limited partnership and its partnership interests
do not trade in any established public market. Jacor Common Stock is quoted on
the Nasdaq National Market under the symbol "JCOR."
The table below sets forth, for the calendar quarters indicated, the
reported high and low per share sales prices of Jacor Common Stock, as reported
on the Nasdaq National Market.
<TABLE>
<CAPTION>
JACOR
COMMON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter................................................................................ $ 14.50 $ 12.00
Second Quarter............................................................................... 17.00 13.00
Third Quarter................................................................................ 19.25 15.00
Fourth Quarter............................................................................... 17.50 15.00
1996
First Quarter................................................................................ $ 22.25 $ 16.00
Second Quarter............................................................................... 31.25 19.50
Third Quarter................................................................................ 35.00 24.75
Fourth Quarter............................................................................... 36.38 23.75
1997
First Quarter................................................................................ $ 31.75 $ 25.63
Second Quarter............................................................................... $ 38.63 $ 26.50
Third Quarter (through July 15, 1997)........................................................ $ 44.25 $ 37.25
</TABLE>
12
<PAGE>
On April 24, 1997, the last full trading day prior to the public
announcement of the execution and delivery of the Purchase Agreement, the
closing price per share of Jacor Common Stock was $28.00. On , 1997, the
most recent date for which it was practicable to obtain market price data prior
to the printing of this Prospectus/Information Statement, the closing price per
share of Jacor Common Stock was $ .
Jacor has not declared any cash dividend on its common stock since its
inception. Jacor intends to retain future earnings for use in its business and
does not anticipate paying any dividends on Jacor Common Stock in the
foreseeable future. Under Jacor's existing credit facilities, Jacor is
prohibited from paying cash dividends on Jacor Common Stock except as may be
provided therein. See "THE ACQUISITION--Financing Arrangements."
On April 11, 1997, there were approximately 1,500 holders of record of Jacor
Common Stock.
13
<PAGE>
RISK FACTORS
RISKS OF ACQUISITION STRATEGY. Jacor intends to pursue growth through the
opportunistic acquisition of broadcasting companies, radio station groups,
individual radio stations and entities that provide programming and services to
radio station groups or individual radio stations. In this regard, Jacor
routinely reviews such acquisition opportunities. Jacor believes that currently
there are a number of acquisition opportunities that would be complementary to
its business. Jacor cannot predict whether it will be successful in pursuing
such acquisition opportunities or what the consequences of any such acquisition
would be. The consummation of each of the Pending Transactions requires FCC
approval with respect to the transfer of the associated broadcast licenses.
Jacor has filed or will file in the ordinary course applications seeking FCC
approval for the Pending Transactions. In addition, the consummation of certain
of the Pending Transactions is subject to the expiration or termination of the
applicable waiting periods under the HSR Act. With regard to each Pending
Transaction, Jacor will use its reasonable best efforts to obtain such approvals
or waivers, but there can be no assurance that (i) the FCC will approve the
transfer of the broadcast licenses in connection with each Pending Transaction;
(ii) the FCC or a court would affirm the FCC consent to the Pending Transaction
if such review is undertaken; (iii) the HSR Act waiting periods with respect to
the various Pending Transactions will expire without objections being raised by
either the Federal Trade Commission (the "FTC") or the Antitrust Division that
would not be eliminated without substantial changes to the terms of the
applicable Pending Transactions; or (iv) Jacor will be successful in
consummating various Pending Transactions in a timely manner or on the terms
originally agreed upon by the parties to the transactions. See "THE
ACQUISITION--Regulatory Matters."
Jacor's acquisition strategy involves numerous risks, including difficulties
in the integration of operations and systems, the diversion of management's
attention from other business concerns and the potential loss of key employees
of acquired businesses. There can be no assurance that Jacor's management will
be able to manage effectively the resulting business or that such acquisitions
will benefit Jacor.
In addition to the expenditure of capital relating to the Pending
Transactions (see "THE ACQUISITION--Financing Arrangements"), future
acquisitions also may involve the expenditure of significant funds. Depending
upon the nature, size and timing of future acquisitions, Jacor may be required
to raise additional financing. There is no assurance that such additional
financing will be available to Jacor on acceptable terms.
INCREASED ANTITRUST SCRUTINY. Subsequent to the passage of the Telecom Act,
the radio broadcast industry has been subject to an increased amount of scrutiny
by the Antitrust Division. Such scrutiny caused Jacor to experience delays in
closing several mergers and acquisitions and to incur increased transaction
costs. Jacor could experience similar delays and increased costs in connection
with future transactions, including one or more of the Pending Transactions.
Although Jacor does not believe that antitrust considerations will adversely
affect Jacor's ability to successfully implement its business strategy, the
effects of the Antitrust Division's heightened level of scrutiny on the radio
broadcast industry and on Jacor are uncertain. There can be no assurance that
these concerns will not negatively impact Jacor. See "THE
ACQUISITION--Regulatory Matters."
FCC REGULATION OF BROADCASTING INDUSTRY. The broadcasting industry is
subject to extensive regulation by the FCC which, among other things, requires
approval for the issuance, renewal, transfer and assignment of broadcasting
station operating licenses, limits the number of broadcasting properties Jacor
may acquire and regulates the operations of broadcasting stations. Additionally,
in certain circumstances, the Communications Act of 1934, as amended (the
"Communications Act"), and FCC rules will operate to impose limitations on alien
ownership and voting of the capital stock of Jacor. Jacor's Certificate of
Incorporation permits the redemption of Common Stock from stockholders where
necessary to protect Jacor's regulatory licenses. See "DESCRIPTION OF JACOR
CAPITAL STOCK." The FCC is considering changes to its rules in response to the
Telecom Act and other industry developments. There can be no
14
<PAGE>
assurance that any such rule changes will not negatively impact Jacor's
operations in the future. See "THE ACQUISITION--Regulatory Matters."
Jacor's business will be dependent upon maintaining its broadcasting
licenses issued by the FCC, which are issued currently for a maximum term of
eight years. Some of Jacor's operating licenses expire at various times in 1997.
Although it is rare for the FCC to deny a renewal application, there can be no
assurance that the pending or future renewal applications will be approved, or
that such renewals will not include conditions or qualifications that could
adversely affect Jacor's operations. Moreover, governmental regulations and
policies may change over time and there can be no assurance that such changes
would not have a material adverse impact upon Jacor's business, financial
condition and results of operations. See "THE ACQUISITION--Regulatory Matters."
COMPETITION; BUSINESS RISKS. Broadcasting is a highly competitive business.
Jacor's radio and television stations compete for audiences and advertising
revenues with other radio and television stations, as well as with other media,
such as newspapers, magazines, cable television, outdoor advertising and direct
mail, within their respective geographic areas. Audience ratings and revenue
shares are subject to change and any adverse change in a particular geographic
area could have a material and adverse effect on the revenue of stations located
in that geographic area. Future operations are further subject to many variables
which could have an adverse effect upon Jacor's financial performance. These
variables include economic conditions, both generally and relative to the
broadcasting industry; shifts in population and other demographics; the level of
competition for advertising dollars with other radio stations, television
stations and other entertainment and communications media; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in governmental regulations and policies and actions of
federal regulatory bodies. Although Jacor believes that each of its stations
will be able to compete effectively in its respective broadcast area, there can
be no assurance that any such station will be able to maintain or increase its
current audience ratings and advertising revenues.
SUBSTANTIAL LEVERAGE AND LIMITED FINANCIAL FLEXIBILITY. The Pending
Transactions (including the Acquisition) may result in a higher level of
indebtedness for Jacor. Jacor's outstanding indebtedness may have the following
important consequences: (i) significant interest expense and principal repayment
obligations resulting in substantial annual fixed charges; (ii) significant
limitations on Jacor's ability to obtain additional debt financing; and (iii)
increased vulnerability to adverse general economic and industry conditions. In
addition, the Credit Facility has a number of financial covenants, including
interest coverage, fixed charge coverage, debt service coverage and a maximum
ratio of debt to earnings before other expenses (income), interest expenses,
taxes, depreciation and amortization. See "UNAUDITED PRO FORMA FINANCIAL
INFORMATION."
SHARE OWNERSHIP BY ZELL/CHILMARK. Zell/Chilmark Fund L.P. ("Zell/Chilmark")
currently holds approximately 29.9% of the outstanding Jacor Common Stock and
Zell/Chilmark is Jacor's largest stockholder as of the date hereof. The large
share ownership of Zell/Chilmark may have the effect of discouraging certain
types of transactions involving an actual or potential change of control of
Jacor, including transactions in which the holders of Common Stock might
otherwise receive a premium for their shares over then-current market prices.
Subject to certain restrictions under the Securities Act, Zell/Chilmark is
free to sell shares of Common Stock from time to time for any reason. By virtue
of its current control of Jacor, Zell/Chilmark could sell large amounts of Jacor
Common Stock by causing Jacor to file a registration statement with respect to
such stock. In addition, Zell/Chilmark could sell its shares of Jacor Common
Stock without registration pursuant to Rule 144 under the Securities Act. Jacor
can make no prediction as to the effect, if any, that such sales of shares of
Jacor Common Stock would have on the prevailing market price. Sales of
substantial amounts of Jacor Common Stock, or the availability of such shares
for sale, could adversely affect prevailing market prices. Sales or transfers of
Jacor Common Stock by Zell/Chilmark could result in another person or entity
becoming the controlling shareholder of Jacor.
15
<PAGE>
KEY PERSONNEL. Jacor's business is dependent upon the performance of
certain key employees, including its Chief Executive Officer and its President.
Jacor employs several on-air personalities with significant loyal audiences in
their respective broadcast areas. Jacor generally enters into long-term
employment agreements with its key on-air talent to protect its interests in
those relationships, but there can be no assurance that all such on-air
personalities will remain with Jacor.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK. Jacor has approximately
55,000,000 shares of Jacor Common Stock which are authorized but unissued
(assuming no exercise of options) and 4,000,000 shares of preferred stock
authorized but unissued for future issuance, without additional stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future offerings to raise additional capital or to
facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved Jacor Common
Stock or preferred stock may be to enable the Jacor Board of Directors to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of Jacor by means of a
merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of management. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of Jacor.
The issuance of preferred stock could have the effect of delaying or
preventing a change in control of Jacor. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of Jacor Common Stock or could adversely effect the rights and powers,
including voting rights of the holders of the Jacor Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Jacor Common Stock. Jacor does not currently have any plans to
issue additional shares of Jacor Common Stock or preferred stock other than
shares of Jacor Common Stock which may be issued in connection with
acquisitions, upon private or public sales of its capital stock at fair market
value, upon the exercise of options and stock units which have been granted or
which may be granted in the future to directors, officers, and employees of
Jacor or shares of Jacor Common Stock issuable upon conversion of the LYONs, the
Citicasters Warrants and the Regent Warrants, all as defined herein.
FORWARD-LOOKING STATEMENTS. This Prospectus/Information Statement sets
forth or incorporates by reference forward-looking statements within the meaning
of Section 27A of the Securities Act. Discussions containing such
forward-looking statements may be found in the material set forth under
"Prospectus/ Information Statement Summary," as well as within the
Prospectus/Information Statement generally. In addition, when used in this
Prospectus/Information Statement, the words "believes," "anticipates," "expects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to a number of risks and uncertainties. Actual
results in the future could differ materially from those described in the
forward-looking statements as a result of the risk factors set forth above and
the matters set forth or incorporated by reference in this
Prospectus/Information Statement generally. Jacor undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect any future events or circumstances. Jacor cautions
the reader, however, that this list of risk factors may not be exhaustive.
AUTHORIZATION BY SECRET AND JACOR
The Purchase Agreement has been approved by the general partners of Secret
subject to the effective registration of the Stock Consideration and the receipt
by all partners of Secret of the Prospectus/ Information Statement and the
satisfaction of the conditions to closing set forth in the Purchase Agreement.
The Purchase Agreement also has been approved by the Jacor and JBC Boards of
Directors. The Purchase Agreement and the Acquisition do not require the
approval of the Jacor stockholders under the
16
<PAGE>
Delaware General Corporate Law (the "DGCL"). No additional corporate action by
Jacor or JBC will be required to effect the Acquisition.
THE ACQUISITION
The description of the Purchase Agreement set forth in this Section includes
all material terms of the Purchase Agreement but does not purport to be complete
and is qualified in its entirety by reference to the Purchase Agreement which is
attached as Annex I to this Prospectus/Information Statement and is incorporated
by reference herein.
BACKGROUND OF AND REASONS FOR THE ACQUISITION
JACOR. Since 1993, Jacor has been actively seeking to expand through
acquisitions and has identified numerous potential acquisition and merger
candidates. Since the enactment of the Telecom Act on February 8, 1996 through
July 15, 1997, Jacor has spent and agreed to spend approximately $1.5 billion on
acquisitions. Jacor continues to negotiate for additional acquisitions in its
existing locations and in new locations. Jacor identified the Stations as
potential acquisition candidates in the first quarter of 1997 and began to
review information regarding Secret and the Stations at that time.
SECRET. The TeleCom Act loosened the restrictions on how many stations one
could own in a given market, and eliminated the restrictions on how many
stations one could own nationwide. These relaxed restrictions effectively
increased the number of potential buyers for any given station, which had the
effect of increasing the value of radio stations in general. As a result, the
investors of Secret determined that through a rational and selective disposition
of its radio stations they would be able to realize a targeted return on their
investment in Secret. Secret has embarked on such a plan of disposing of its
holdings in radio stations, and this present transaction is part of that plan.
DELIVERY OF CONSIDERATION
The Purchase Agreement provides that at the Closing JBC shall (i) deliver
the Cash Consideration by wire transfer to Secret and (ii) deliver the Stock
Consideration to Secret or to the partners of Secret as determined by Secret in
its sole discretion, to be distributed entirely to Secret or pro rata to the
partners of Secret as determined pursuant to the Purchase Agreement. Secret has
determined that the Stock Consideration will be delivered to the partners of
Secret.
CERTAIN TERMS OF THE PURCHASE AGREEMENT AND RELATED AGREEMENTS
REPRESENTATIONS AND WARRANTIES. The Purchase Agreement contains various
representations and warranties of the parties, each of which survives the
consummation of the Acquisition, including, among other things, representations
from the parties, as of the date of the Purchase Agreement relating to (i) each
party's organization and similar corporate matters; (ii) the authorization,
execution, delivery, performance and enforceability of the Purchase Agreement
and related matters; (iii) the absence of conflicting agreements or required
consents; (iv) with respect to JBC, the absence of material litigation; (v) the
accuracy of the information provided by each party with respect to this
Prospectus/Information Statement; (vi) the issuance and registration of the
Jacor Common Stock; (vii) government authorizations required for the conduct of
the business and operations of the Stations; (viii) the Stations' compliance
with all applicable FCC regulations; (ix) Secret's payment of taxes; (x) good
and marketable title to the Stations Assets and real property used in connection
with the operations of the Stations ("Real Estate"); (xi) the validity and
enforceability of contracts relating to the Stations ("Contracts") and Secret's
compliance with such Contracts; (xii) certain environmental matters, (xiii)
Secret's intellectual property rights, (xiv) the accuracy of certain financial
statements of the Stations and compliance with generally accepted accounting
principles, and (xv) certain personnel and employment agreement issues of
Secret.
17
<PAGE>
COVENANTS. Pursuant to the Purchase Agreement, JBC has agreed, subject to
the satisfaction or waiver of the conditions of the Purchase Agreement, to (i)
purchase the Stations Assets from Secret and assume the Assumed Liabilities (as
defined in the Purchase Agreement) of Secret on the Closing Date; (ii) notify
Secret in writing of any change in any of the information contained in the
representations and warranties contained in the Purchase Agreement and of any
litigation, arbitration or administrative proceeding pending or, to its
knowledge, threatened against JBC which challenges the transactions contemplated
by the Purchase Agreement; (iii) not take any action which is materially
inconsistent with its obligations under the Purchase Agreement or take any
action which would cause any representation or warranty of JBC contained in the
Purchase Agreement to be or become false or invalid or which could hinder or
delay the consummation of the transactions contemplated by the Purchase
Agreement. The Purchase Agreement also obligates JBC, subject to the terms of
the Time Brokerage Agreement by and between Secret and JBC (the "Time Brokerage
Agreement"), for a period of 120 days from the Closing Date ("Collection
Period") to use reasonable efforts to assist Secret in collection of Secret's
accounts receivable arising prior to the Closing Date ("Secret's Accounts
Receivable") in the normal and ordinary course of JBC's business and to apply
all such amounts collected to the debtor's oldest account receivable first,
subject to certain exceptions under the Purchase Agreement. Every 30 days during
the Collection Period, JBC shall make a payment to Secret equal to the amount of
all collections of Secret's Accounts Receivable during such 30 day period less
any commissions and/or other expenses due thereon.
Pursuant to the Purchase Agreement, Secret has agreed that prior to the
Closing Date, except as permitted by the Purchase Agreement or the prior written
consent of JBC, Secret shall: (i) subject to JBC's time brokering of the
Stations pursuant to the Time Brokerage Agreement, (a) conduct the business and
operations of the Stations in the ordinary and prudent course of business
consistent with past practice and with the intent of preserving the ongoing
operations and assets of the Stations; (b) preserve the Stations' operations,
advertisers, customers, suppliers and others having business relations with the
Stations; (c) operate the Stations in accordance with FCC rules and regulations;
(ii) promptly notify JBC of any fact relating to Secret which would cause the
FCC to deny its consent to the transactions contemplated by the Purchase
Agreement and to use its best efforts to take such steps as may be necessary to
remove any such impediments to the FCC's consent; (iii) subject to JBC's time
brokering of the Stations pursuant to the Time Brokerage Agreement, not (a)
sell, lease or dispose of or commit to sell, lease or dispose of any of the
Stations Assets; (b) sell broadcast time on a prepaid basis (other than in the
course of existing credit practices); (c) except as required by applicable law,
grant or agree to grant any general increases in the rates of salaries or
compensation payable to employees of the Stations; (d) grant or agree to grant
any specific bonus or increase in compensation to any executive or management
employee of the Stations other than in accordance with past practice or in
compliance with the Stations' budgets for 1997 or for which Secret has disclosed
and for which it will be solely responsible; (e) provide any new pension,
retirement or other employment benefits for employees of the Stations or any
increases in any existing benefits; (f) modify, change or terminate any
Contract; (g) create, assume or permit to exist any mortgage, pledge, lien, or
other charge or encumbrance or rights affecting any of the Stations Assets,
except for those in existence on the date of the Purchase Agreement; (h) change
the call letters of the Stations; or (i) take any action which could hinder or
delay the consummation of the transactions contemplated by the Purchase
Agreement; (iv) provide JBC and its representatives, upon JBC's reasonable
request and upon reasonable notice, full and reasonable access during normal
business hours to all of Secret's personnel, properties, books, Contracts,
reports and records, real estate, buildings and equipment relating to the
Stations and to the Stations' employees, and furnish JBC with information and
copies of all documents and agreements relating to the Stations and the
operations thereof that JBC reasonably requests; (v) deliver to JBC within 30
days of the end of each calendar quarter an unaudited statement of revenue and
expenses of the Stations and a balance sheet for the month then ended in
addition to any and all information customarily prepared by the Stations
concerning the financial condition and results of operations for the Stations;
(vi) cooperate, and use its reasonable best efforts to cause its independent
accountants to reasonably cooperate with JBC, at JBC's expense, in order to
enable JBC to have Secret's or JBC's independent
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accountants prepare audited financial statements for the Stations for the most
recently completed fiscal year-end; (vii) use its reasonable best efforts to
obtain (a) any third party consents necessary for the assignment of Contracts
and (b) estoppel certificates from any and all lessors who are party to certain
real estate contracts as disclosed in a schedule to the Purchase Agreement;
(viii) use its reasonable best efforts to transfer to JBC any discounts or other
benefits which it enjoys under any Contract; (ix) notify JBC of any litigation,
arbitration or administrative proceeding pending or, to the best of its
knowledge, threatened, which challenges the transactions contemplated by the
Purchase Agreement and if any of the normal broadcast transmissions of any
Stations are interrupted, interfered with or in any way impaired and provide JBC
with prompt written notice of the problem and the measures being taken to
correct such problem; (x) not take any action which is materially inconsistent
with its obligations under the Purchase Agreement, or take any action which
would cause any representation or warranty of Secret contained in the Purchase
Agreement to be or become false or invalid or which could hinder or delay the
consummation of the Acquisition; (xi) transfer, convey, assign and deliver to
JBC on the Closing Date the Stations Assets and the Assumed Liabilities as
provided in the Purchase Agreement; (xii) not (a) waive or release any right
relating to the business or operations of the Stations, except for adjustments
or settlements made in the ordinary course of business consistent with past
practices; (b) transfer or grant any material rights under any of the Stations
Licenses (as defined herein); (c) enter into any commitment for capital
expenditures for which JBC would become liable after the Closing Date; (d)
subject to JBC's time brokering of the Stations pursuant to the Time Brokerage
Agreement, introduce any material changes in the broadcast hours or in the
format of the Stations or any other material change in the Stations' programming
policies; (e) enter into any transaction or make or enter into any contract or
commitment with respect to any of the Stations or the Stations Assets which is
not in the ordinary course of business consistent with past practices; and (f)
change the call letters of any Station; (xiii) deliver to JBC and Jacor a letter
("Affiliate Letter") identifying all persons who are, at the time of the
transactions contemplated by the Purchase Agreement are submitted to the
partners of Secret for approval, "affiliates" of Secret for purposes of Rule 145
under the Securities Act ("Secret Rule 145 Affiliates") and cause each person
who is identified as a Secret Rule 145 Affiliate in such letter to deliver to
JBC and Jacor on or prior to the Closing Date a written agreement substantially
in the form attached as Exhibit F to the Purchase Agreement; (xiv) use its best
efforts to complete construction under Construction Permit BP-960711AA and to
file and prosecute FCC Form 302 License to Cover.
In addition to the foregoing, Secret has agreed that, commencing on the date
of the Purchase Agreement through the Closing or earlier termination of the
Purchase Agreement, JBC shall have the exclusive right to consummate the
transactions contemplated in the Purchase Agreement, and during such exclusive
period, Secret agrees that neither Secret nor any partner or employee or other
representative or agent of Secret: (i) will initiate, solicit or encourage,
directly or indirectly, any inquiries, or the making or implementation of any
proposal or offer with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of, all or any portion of the
Stations Assets or any securities of Secret (any such inquiry, proposal or offer
being hereinafter referred to as an "Acquisition Proposal" and any such
transaction being hereinafter referred to as an "Acquisition Transaction"); (ii)
will engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussion with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; or (iii) will continue any existing
activities, discussions or negotiations with any parties conducted prior to the
date of the Purchase Agreement with respect to any Acquisition Proposal or
Acquisition Transaction. Secret has agreed to take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken by
them pursuant to the Purchase Agreement.
The Purchase Agreement also obligates JBC and Secret to, among other things,
(i) subject to the requirements of applicable law, and except as otherwise
provided in the Purchase Agreement, keep confidential all information obtained
by each of them with respect to the other party in connection with the Purchase
Agreement and the negotiations preceding the Purchase Agreement and use such
information solely in connection with the transactions contemplated by the
Purchase Agreement; (ii) cooperate with
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one another in taking any reasonable actions necessary or helpful to accomplish
the transactions contemplated by the Purchase Agreement; (iii) use their
reasonable best efforts to obtain, and to cooperate with each other in
obtaining, all authorizations, consents, orders and approvals of any
governmental authority that may be or become necessary in connection with the
consummation of the transactions contemplated by the Purchase Agreement, and to
take all reasonable actions to avoid the entry of any order or decree by any
governmental authority prohibiting the consummation of the transactions
contemplated by the Purchase Agreement; (iv) cooperate to prepare and file the
Registration Statement; and (v) prior to the Closing, enter into an agreement
providing for shelf registration of resale of the shares of Jacor Common Stock
comprising the Stock Consideration.
The Purchase Agreement may be terminated in the event of certain breaches of
a representation, warranty or covenant therein. See "THE ACQUISITION--Certain
Terms of the Acquisition Agreement-- Termination; Termination Remedies."
CONDITIONS PRECEDENT TO THE ACQUISITION. The obligations of JBC and Secret
to effect the Acquisition are subject to the fulfillment or waiver of certain
conditions specified in the Purchase Agreement.
Such conditions specified with respect to JBC's obligations to close
include, among others: (i) the representations and warranties of Secret
contained in the Purchase Agreement shall be true and complete in all material
respects as of the date of the Purchase Agreement and as of the Closing Date as
if made on and as of that date except for changes expressly permitted or
contemplated by the terms of the Purchase Agreement, or changes that result from
JBC's actions under the Time Brokerage Agreement; (ii) all of the terms,
covenants and conditions to be complied with and performed by Secret on or prior
to the Closing Date shall have been complied with or performed in all material
respects; (iii) JBC shall have received a certificate, dated as of the Closing
Date, from Secret, executed by the partners of Secret, to the effect that: (a)
the representations and warranties of Secret contained in the Purchase Agreement
are true and complete in all material respects on and as of the Closing Date as
if made on and as of that date; and (b) Secret has complied with or performed in
all material respects all terms, covenants and conditions to be complied with or
performed by it on or prior to the Closing Date; (iv) the FCC consent shall have
been obtained and, unless JBC has waived such condition, shall have become a
final order; (v) Secret shall be the holder of the Stations Licenses and all
other licenses, permits and other authorizations listed in a schedule pursuant
to the Purchase Agreement and there shall not have been any modification of any
of such licenses, permits and other authorizations which has an adverse effect
on any of the Stations or the operations thereof; (vi) no suit, action, claim or
governmental proceeding shall be pending or threatened against, and no order,
decree or judgment of any court, agency or other governmental authority shall
have been rendered against, any party which: (a) would render it unlawful, as of
the Closing Date, to effect the transactions contemplated by the Purchase
Agreement in accordance with its terms; (b) question the validity or legality of
any transaction contemplated by the Purchase Agreement; (c) seeks to enjoin any
transaction contemplated by the Purchase Agreement; (d) seeks material damages
on account of the consummation of any transaction contemplated by the Purchase
Agreement; or (e) is a petition of bankruptcy by or against Secret, an
assignment by Secret for the benefit of its creditors, or other similar
proceeding; (vii) Secret shall have obtained and shall have delivered to JBC all
third-party consents to the assignment of certain contracts and an estoppel
certificate from the lessor under each of the Real Estate Contracts (as defined
in the Purchase Agreement); (viii) Secret shall have delivered or caused to be
delivered to JBC, on the Closing Date, all deeds, bills of sale, endorsements,
assignments and other instruments of conveyance and transfer reasonably
satisfactory in form and substance to JBC, effecting the sale, transfer,
assignment and conveyance of the Stations Assets to JBC; (ix) within 45 days
after the date of the Purchase Agreement, JBC shall have received a complete
Phase I environmental audit report at JBC's sole expense which report shall be
satisfactory to JBC in all respects; (x) JBC shall have obtained, at its
expense, a commitment for an ALTA title insurance policy and staked on ground
ALTA survey for each of the Real Estate which shall in all respects be
acceptable to JBC; (xi) within 45 days after the date of the Purchase Agreement,
JBC shall have determined to its sole satisfaction that services for utilities,
including
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without limitation, for water and sewer service, telephone service, electric
and/or gas service, and sanitary services are sufficient to service the current
use of the Real Estate and that all buildings, structures, towers, antennae,
improvements, and fixtures comprising part of the real properties leased by
Secret are in good and technically sound operating condition, have no latent
structural or mechanical defects of material significance and are suitable for
the purposes for which they are being used; (xii) within 30 days from the date
of the Purchase Agreement, (a) the Boards of Directors of JBC and Jacor shall
have approved and ratified the Purchase Agreement and the consummation of the
transactions contemplated by the Purchase Agreement; and (b) the lenders of JBC,
Jacor and any of their affiliates shall have granted in writing their consent
and any required waivers to the transactions contemplated by the Purchase
Agreement; (xiii) from the date of the Purchase Agreement through the Closing
Date, the Time Brokerage Agreement shall not have been terminated by JBC as
permitted by the Time Brokerage Agreement as a result of Secret's material
noncompliance with its obligations under the Time Brokerage Agreement; (xiv) the
Registration Statement and any post-effective amendments required or deemed
necessary by Jacor shall have become effective in accordance with the provisions
of the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission; (xv) Secret
shall have given written notice to renew the lease agreement between Cannell
Communications, L.P. and Booth American Company for the WLTF(FM) Tower and
Transmitter Site on or before May 10, 1997 and Secret shall provide JBC with
written evidence of such renewal notice on or before May 15, 1997.
The conditions subject to fulfillment or waiver as specified in the Purchase
Agreement with respect to Secret's obligations to close include, among others:
(i) the representations and warranties of JBC contained in the Purchase
Agreement shall be true and complete in all material respects as of the date of
the Purchase Agreement and as of the Closing Date as if made on and as of that
date except for changes expressly permitted or contemplated by the terms of the
Purchase Agreement; (ii) all of the terms, covenants and conditions to be
complied with and performed by JBC on or prior to the Closing Date shall have
been complied with or performed in all material respects; (iii) Secret shall
have received a certificate, dated as of the Closing Date, executed by the
President of JBC, to the effect that: (a) the representations and warranties of
JBC contained in the Purchase Agreement are true and complete in all material
respects on and as of the Closing Date as if made on and as of that date; and
(b) JBC has complied with or performed in all material respects all terms,
covenants and conditions to be complied with or performed by it on or prior to
the Closing Date; (iv) the FCC consent shall have been obtained and, unless JBC
has waived such condition, shall have become a final order; (v) no suit, action,
claim or governmental proceeding shall be pending or threatened against, and no
order, decree or judgment of any court, agency or other governmental authority
shall have been rendered against, any party which: (a) would render it unlawful,
as of the Closing Date, to effect the transactions contemplated by the Purchase
Agreement in accordance with its terms; (b) questions the validity or legality
of any transaction contemplated by the Purchase Agreement; (c) seeks to enjoin
any transaction contemplated by the Purchase Agreement; (d) seeks material
damages on account of the consummation of any transaction contemplated by the
Purchase Agreement; or (e) is a petition of bankruptcy by or against JBC, an
assignment by JBC for the benefit of its creditors, or other similar proceeding;
(vi) JBC shall have delivered or caused to be delivered to Secret on the Closing
Date the closing documents specified in the Purchase Agreement; (vii) the
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued by the Commission; (viii)
Secret and Jacor shall have entered into an agreement providing for shelf
registration of resale of the shares of Jacor Common Stock comprising the Stock
Consideration; and (ix) JBC shall have satisfied or waived certain of its
conditions of the Closing as set forth in the Purchase Agreement.
TERMINATION; TERMINATION REMEDIES. The Purchase Agreement may be terminated
at any time prior to the Closing (i) by written mutual consent; (ii) by JBC if
Secret shall have breached in any material respect any of its representations or
warranties or defaulted in any material respect in the observance or in the due
and timely performance of any of its covenants or agreements contained in the
Purchase Agreement and such breach or default has not been cured within thirty
(30) days of the date of notice of breach or default
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served by JBC; (iii) by Secret if JBC should have breached in any material
respect any of its representations or warranties or defaulted in any material
respect in the observance or in the due and timely performance of any of its
covenants or agreements contained in the Purchase Agreement and such breach or
default has not been cured within thirty (30) days of the date of notice of
breach or default served by Secret; (iv) by JBC if the FCC denies the
application for FCC consent and approval of the assignment of the Stations
Assets and all licenses, permits and other authorizations issued by the FCC
("Stations Licenses") or designates such application for a hearing neither as a
result of any action or inaction by Secret; (v) by either party if any court of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Purchase Agreement or if any court, legislature body or
governmental or regulatory authority shall have taken action that would make the
consummation of the transactions contemplated by the Purchase Agreement illegal;
(vi) by either party if the Closing shall not have been consummated on or before
March 1, 1998; (vii) by JBC if it shall become apparent in JBC's judgment
reasonably exercised that any condition to JBC's obligation to close as set
forth in the Purchase Agreement will not be satisfied on or before March 1,
1998; or (viii) by JBC if Secret fails to properly notify JBC of certain events
as set forth in Section 9.2 of the Purchase Agreement.
In addition, in the event that any normal broadcast transmission of either
Station is interrupted, interfered with or in any way impaired and either of
such Stations is not restored so that operation is resumed to full licensed
power and antenna height within five days of such event, or if more than one
such material event occurs within any 30 day period, or if any of the Stations
shall be off the air for more than 72 consecutive hours, then JBC shall have the
right to terminate the Purchase Agreement.
If the parties fail to consummate the Purchase Agreement on the Closing Date
due solely to JBC's material breach of the Purchase Agreement, and Secret is not
at that time in material breach of the Purchase Agreement, Secret shall be
entitled to obtain specific performance of the terms of the Purchase Agreement
in addition to any other remedies including, but not limited to, monetary
damages.
If Secret fails to perform under the provisions of the Purchase Agreement,
JBC shall be entitled to obtain specific performance of the terms of the
Purchase Agreement in addition to any other remedies including, but not limited
to, monetary damages. If any action is brought by JBC to enforce the Purchase
Agreement, Secret shall waive the defense that there is an adequate remedy at
law.
SURVIVAL. The Purchase Agreement provides that all covenants and agreements
(together, "Agreements") shall survive the Closing without limitation while the
survival of certain of the representations and warranties (together,
"Warranties") are subject to limitations as specified in the Purchase Agreement.
INDEMNIFICATION. The Purchase Agreement provides that Secret shall defend,
indemnify and hold harmless JBC from and against any and all losses, costs,
damages, liabilities and expenses, including reasonable attorneys' fees and
expenses ("Damages"), incurred by JBC arising out of or related to: (i) any
breach of the Agreements or Warranties given or made by Secret in the Purchase
Agreement; (ii) the Retained Liabilities (as defined in the Purchase Agreement);
(iii) any failure of the parties to comply with any "bulk sales" laws applicable
to the transactions contemplated by the Purchase Agreement; (iv) the conduct of
the business and operations of the Stations or any portion thereof by Secret or
the use or ownership of any of the Stations Assets by Secret prior to the
Closing Date, but excluding all Damages arising from JBC's actions under the
Time Brokerage Agreement; and (v) the failure of JBC to hire any employee of
Secret.
The Purchase Agreement also provides that JBC shall defend, indemnify and
hold harmless Secret from and against any and all Damages incurred by Secret
arising out of or related to: (a) any breach of the Agreements and Warranties
given or made by JBC in this Agreement; (b) the Assumed Liabilities; and (c) the
conduct of the business and operations of the Stations or any portion thereof or
the use or ownership of any of the Stations Assets on or after the Closing Date.
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Notwithstanding the foregoing provisions neither party shall have an
obligation to defend, indemnify and hold harmless the other party for Damages
arising out of any matter for any breach of the Agreements or Warranties until
and only to the extent that the aggregate Damages on account thereof, exceed
$250,000. The foregoing does not apply to JBC's obligation to pay the Cash
Consideration and the Stock Consideration.
AMENDMENT. No amendment or waiver of compliance with any provision or
condition of the Purchase Agreement shall be effective unless evidenced by an
instrument in writing signed by the party against whom enforcement of any
waiver, amendment, change, extension or discharge is sought.
EXPENSES. Except as set forth below or otherwise expressly set forth in the
Purchase Agreement, each party to the Acquisition shall be solely responsible
for all costs and expenses incurred by it in connection with the negotiation,
preparation and performance of and compliance with the terms of the Purchase
Agreement. All costs of transferring the Stations Assets in accordance with the
Purchase Agreement, including recordation, transfer and documentary taxes and
fees, and any excise, sales or use taxes shall be paid by Secret. Any filings or
grant fees imposed by any governmental authority the consent of which or the
filing with which is required for the consummation of the Acquisition shall be
paid equally by JBC and Secret. Secret shall pay one-half of the first $500,000
of all expenses and filing fees relating to the Registration Statement up to a
maximum amount of $250,000.
TIME BROKERAGE AGREEMENT. Simultaneously with the execution of the Purchase
Agreement, JBC and Secret entered into a Time Brokerage Agreement. Pursuant to
the Time Brokerage Agreement, Secret agreed to make available to JBC the
broadcasting transmission facilities of the Stations and/or cause to be
broadcast on the Stations JBC's programmings beginning within five business days
after the applicable waiting periods shall have expired or been terminated under
the HSR Act and ending on the earlier of (i) the Closing Date or (ii) the date
which is ten days following any termination of the Purchase Agreement in
accordance with the terms thereof. The Time Brokerage Agreement went into effect
as of June 1, 1997.
An event of default by either party under the Time Brokerage Agreement shall
constitute a material default under the Purchase Agreement and insofar as the
cure period specified in the Time Brokerage Agreement has expired no further
cure period shall be afforded under the provisions of the Purchase Agreement.
ASSIGNMENT AND ASSUMPTION AGREEMENT. In order to effectuate the assignment
and assumption of the Assumed Liabilities pursuant to the Purchase Agreement,
JBC and Secret have also entered into an assignment and assumption agreement.
FINANCING ARRANGEMENTS
Jacor expects that the funds necessary to pay the Cash Consideration will be
obtained from borrowings under the Credit Facility and/or cash on hand which
includes proceeds from the 1997 Equity Offerings and the 1997 8 3/4% Notes
Offering.
CREDIT FACILITY. JCC entered into its existing Credit Facility on June 12,
1996, as amended and restated on February 14, 1997, with a syndicate of banks
and other financial institutions. The Credit Facility provides availability of
$750.0 million of loans to JCC in three components: (i) a revolving credit
facility of up to $450.0 million with mandatory semi-annual commitment
reductions beginning June 12, 1999 and a final maturity date of June 12, 2003;
(ii) a term loan of $200.0 million with scheduled semi-annual reductions
beginning December 12, 1997 and a final maturity date of June 12, 2003; and
(iii) a tranche B term loan of $100.0 million with scheduled semi-annual
reductions beginning December 12, 1998 and a final maturity date no later than
June 12, 2004. The Credit Facility bears interest at a rate that fluctuates with
a bank base rate and/or the Eurodollar rate per annum.
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In June 1997, Jacor entered into discussions to expand the availability
under the Credit Facility from up to $750.0 million up to $1.15 billion. There
can be no assurance that the availability under the Credit Facility will be
increased.
The loans under the Credit Facility are guaranteed by each of Jacor's direct
and indirect subsidiaries other than certain immaterial subsidiaries. Jacor's
obligations with respect to the Credit Facility and each guarantor's obligations
with respect to the related guaranty are secured by substantially all of their
respective assets, including, without limitation, inventory, equipment, accounts
receivable, intercompany debt and, in the case of Jacor's subsidiaries, capital
stock. JCC's obligations under the Credit Facility are secured by a first
priority lien on the capital stock of Jacor's and JCC's subsidiaries and by the
guarantee of JCC's parent, Jacor.
The Credit Facility contains covenants and provisions that restrict, among
other things, Jacor's and JCC's ability to: (i) incur additional indebtedness;
(ii) incur liens on its property; (iii) make investments and advances; (iv)
enter into guarantees and other contingent obligations; (v) merge or consolidate
with or acquire another person or engage in other fundamental changes; (vi)
engage in certain sales of assets; (vii) make capital expenditures; (viii) enter
into leases; (ix) engage in certain transactions with affiliates; and (x) make
restricted junior payments. The Credit Facility also requires the satisfaction
of certain financial performance criteria (including a consolidated interest
coverage ratio, a leverage-to-operating cash flow ratio and a consolidated
operating cash flow available for fixed charges ratio) and the repayment of
loans under the Credit Facility with proceeds of certain sales of assets and
debt issuances, and with 50% of Jacor's and JCC's Consolidated Excess Cash Flow
(as defined in the Credit Facility).
Events of default under the Credit Facility include various events of
default customary for such type of agreement, such as failure to pay scheduled
payments when due, cross defaults on other indebtedness, change of control
events under other indebtedness (including the LYONs, the 1996 10 1/8% Notes,
the 1996 9 3/4% Notes and the 1997 8 3/4% Notes, all as defined herein) and
certain events of bankruptcy, insolvency and reorganization. In addition, the
Credit Facility includes events of default for JCC and the cessation of any lien
on any of the collateral under the Credit Facility as a perfected first priority
lien and the failure of Zell/Chilmark appointees to represent at least 30% of
the Jacor Board of Directors.
For purposes of the Credit Facility, a change of control includes the
occurrence of any event that triggers a change of control under the LYONs, the
1996 10 1/8% Notes, the 1996 9 3/4% Notes or the 1997 8 3/4% Notes. Such change
of control under the Credit Facility would constitute an event of default which
would give the syndicate the right to accelerate the unpaid principal amounts
due under the Credit Facility. Upon such acceleration, there is no assurance
that JCC will have funds available to fund such repayment or that such funds
will be available on terms acceptable to JCC.
1997 EQUITY OFFERINGS. In May, 1997 Jacor sold 7,647,500 shares of Common
Stock to the public and 673,628 shares of Common Stock to affiliates of Equity
Group Investments, Inc., an affiliate of Zell/ Chilmark. A portion of the $247.1
million net proceeds from the 1997 Equity Offerings may be used to pay all or
part of the Cash Consideration.
1997 8 3/4% NOTES OFFERING. In June, 1997 JCC issued and sold 8 3/4% Senior
Subordinated Notes due 2007. In addition to repaying a portion of the Credit
Facility, a portion of the $147.0 million net proceeds from the 1997 8 3/4%
Notes Offering may be used to pay all or part of the Cash Consideration.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Other than the limited partner's ownership of the limited partnership
interests in Secret, the officers and members of the management committee of
Secret do not have any additional interests in the Acquisition.
In connection with the Purchase Agreement, Jacor and JBC will enter into a
Registration Rights Agreement with Secret and certain of its partners which
provides that Jacor will register the shares of Jacor
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Common Stock comprising the Stock Consideration if a partner is unable to sell
the shares without registration. See "FEDERAL SECURITIES LAWS CONSEQUENCES." The
form of the Registration Rights Agreement to be entered into is attached as
Annex II to this Prospectus/Information Statement.
REGULATORY MATTERS
The receipt of certain federal and state governmental or regulatory
approvals are required in order to consummate the Acquisition, including the
consent and approval of the FCC and the expiration of the waiting period under
the HSR Act. JBC and Secret have agreed in the Purchase Agreement to use their
reasonable best efforts to obtain, and to cooperate with each other in
obtaining, all such approvals.
FCC APPROVALS. On May 1, 1997 Jacor filed an application ("Assignment
Application") with the FCC requesting the FCC's consent to the assignment of the
Stations Licenses to Jacor Broadcasting Corporation. The Mass Media Bureau of
the FCC, acting pursuant to delegated authority, granted its initial approval of
the applications on June 16, and public notice of the grants was issued by the
FCC on June 23, 1997. No party filed a petition to deny, as permitted pursuant
to section 309(d) of the Communications Act or to Jacor's knowledge, other
objection to the Assignment Application prior to grant.
Within thirty days following FCC public notice of such a grant (in this
case, July 23, 1997), parties in interest may file a petition for
reconsideration requesting that the FCC (or the FCC's staff in the case of a
staff grant, as here), reconsider its action. Alternatively in the case of a
staff grant, as here, parties in interest may within the same thirty day period
file an "Application for Review" requesting that the FCC review and set aside
the staff grant. In the event of a staff grant, as here, a party in interest
could take both actions, by first filing a petition for reconsideration with the
staff and later, within thirty days following public notice of the denial of
that petition, filing an Application for Review. Moreover, if the FCC denies an
Application for Review, or if it acts upon its own review of the staff grant,
within thirty days of public notice of an action by the FCC, parties in interest
may appeal the FCC's action to the U.S. Court of Appeals for the District of
Columbia Circuit. In addition, the FCC staff may reconsider on its own motion
its action granting the Assignment Application within thirty days following
public notice of such grant (in this case, July 23, 1997). No such actions have
been taken to Jacor's knowledge. To Jacor's knowledge, no party has filed a
petition for reconsideration or an Application for Review, nor has the FCC staff
undertaken reconsideration as of this date. In the case of a staff grant, the
FCC may also review the staff action on its own motion within forty days
following public notice of the staff's action (in this case, August 4, 1997). No
such action has been taken as of this date to Jacor's knowledge.
HSR APPLICATION. Under the HSR Act and the rules promulgated thereunder by
the FTC, the Acquisition may not be consummated until notifications have been
given and certain information has been furnished to the Antitrust Division and
the FTC and specified waiting period requirements have been satisfied. JBC and
Secret each filed with the Antitrust Division and the FTC a Notification and
Report Form (the "Notification and Report Form") with respect to the Acquisition
on May 5, 1997. As of the date hereof, the applicable waiting period under the
HSR Act has terminated.
NASDAQ LISTING
Jacor will use its reasonable best efforts to cause the Jacor Common Stock
to be issued pursuant to the Acquisition to be listed for trading on the Nasdaq
National Market.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes the Acquisition will be considered a taxable
transaction to Secret and its partners. Gain or loss to Secret and its partners
on the disposition of the Stations Assets will be measured by the difference
between the amount realized by Secret and Secret's tax basis in the Stations
Assets. The amount realized by Secret will be the sum of the Cash Consideration
and the fair market value
25
<PAGE>
of the Stock Consideration on the Closing Date. The amount realized will be
allocated to each of the Stations Assets based on the allocation agreed to by
Secret and JBC pursuant to the Purchase Agreement.
For purposes of Section 1231 of the Internal Revenue Code, the Stations
Assets will be considered as property used in the trade or business. In
determining whether the gains or losses on the disposition of the Stations
Assets will be considered as gains or losses from the sale or exchange of
capital assets, Section 1231 will apply separately to each of the partners of
Secret. The disposition of certain of the Stations Assets will also be subject
to Sections 1245 and 1250 of the Internal Revenue Code, which may have the
effect of requiring a portion of any gain realized by Secret and its partners to
be treated as ordinary income.
The shares of Jacor Common Stock received by the partners of Secret in the
Acquisition will have a tax basis for federal income tax purposes in their hands
equal to the fair market value of such shares on the Closing Date. The holding
period for the shares in the hands of the partners of Secret will begin on the
Closing Date.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE ACQUISITION. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THE DISCUSSION. EACH PARTNER SHOULD
CONSULT ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
ACQUISITION TO THE HOLDER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
The Acquisition will be accounted for as a "purchase," as such term is used
under generally accepted accounting principles. Accordingly, from and after the
Closing Date, the Stations' consolidated results of operations will be included
in Jacor's consolidated results of operations. For purposes of preparing Jacor's
consolidated financial statements, Jacor will establish a new accounting basis
for the Stations' assets and liabilities based upon the fair market values
thereof and Jacor's purchase price, including the costs of the Acquisition.
Accordingly, the purchase accounting adjustments made in connection with the
development of the pro forma condensed financial information appearing elsewhere
in this Prospectus/Information Statement are preliminary and have been made
solely for purposes of developing such pro forma consolidated financial
information to comply with disclosure requirements of the Commission. Although
the final allocation will differ, the pro forma consolidated financial
information reflects management's best estimate based upon currently available
information.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Jacor Common Stock received by the Partners in the Acquisition
will be freely transferable, except that shares of Jacor Common Stock received
by persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of Secret prior to the Acquisition may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Jacor) or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of Jacor or Secret generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party as well as principal shareholders of such party. The Purchase Agreement
requires Secret to use its reasonable best efforts to cause each of its
affiliates to execute a written agreement to the effect that such affiliate will
not offer or sell or otherwise
26
<PAGE>
dispose of any shares of Jacor Common Stock issued to such affiliate in or
pursuant to the Acquisition in violation of the Securities Act or the rules and
regulations promulgated by the Commission thereunder.
Pursuant to the terms of the Registration Rights Agreement, Jacor has agreed
to file with the Commission no later than ten business days after Jacor's
receipt of written notice from a holder of Registrable Securities (as defined in
the Registration Rights Agreement) informing Jacor of the reasons why such
holder is unable to sell all of the holder's Registrable Securities without
registration under the Securities Act (excluding the manner of sale requirement
contained in Rule 144), a registration statement under the Securities Act to
provide for the sale by the holders of the Registrable Securities from time to
time on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act.
Pursuant to the Purchase Agreement, Jacor will also file an application with
the Nasdaq Stock Market seeking approval for quotation on the Nasdaq National
Market of the shares of Jacor Common Stock to be issued in connection with the
Acquisition.
27
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on the historical financial statements of Jacor
and the Stations and has been prepared to illustrate the effects of the
acquisitions described below and the related financing transactions.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 31, 1996, the LTM ended March 31, 1997 and the three
months ended March 31, 1996, give effect to each of the following transactions
as if such transactions had been completed January 1, 1996: (i) the 1997 Equity
Offerings and the 1997 8 3/4% Notes Offering, (ii) the Premiere Merger, (iii)
the EFM Acquisition, and (iv) the Other Acquisitions. The unaudited pro forma
condensed consolidated statement of operations for the three months ended March
31, 1997 gives effect to: (i) the 1997 Equity Offering and the 1997 8 3/4% Notes
Offering, (ii) the Premiere Merger, (iii) the EFM Acquisition, and (iv) Jacor's
1997 acquisition of Regent and other 1997 immaterial acquisitions, including the
Acquisition, both completed and pending as of April 30, 1997. The pro forma
condensed consolidated balance sheet as of March 31, 1997 has been prepared as
if the Acquisition and the other Pending Transactions (and not including the
immaterial acquisition agreements entered into by Jacor after April 30, 1997)
had occurred on March 31, 1997. This Acquisition is not considered a significant
transaction for purposes of the pro forma financial information and is therefore
not separately reflected in the pro forma financial statements.
The Pending Transactions will be accounted for using the purchase method of
accounting. The total purchase costs of the Pending Transactions will be
allocated to the tangible and intangible assets and liabilities acquired based
upon their respective fair values. The allocation of the aggregate purchase
price reflected in the Pro Forma Financial Information is preliminary. The final
allocation of the purchase price will be contingent upon the receipt of final
appraisals of the acquired assets. The unaudited Pro Forma Financial Information
is not necessarily indicative of either future results of operations or the
results that might have occurred if the foregoing transactions had been
consummated on the indicated dates.
The unaudited Pro Forma Financial Information should be read in conjunction
with Jacor's Consolidated Financial Statements and notes thereto and the
Stations' Combined Financial Statements included herein.
28
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------
OTHER JACOR
ACQUISITIONS OTHER
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL HISTORICAL
JACOR ADJUSTMENTS PRO FORMA EFM PREMIERE
---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenue............................................ $223,761 $220,373(a) $444,134 $47,357 $23,826
Broadcast operating expenses........................... 151,065 154,119(a) 305,184 29,538 16,533
Depreciation and amortization.......................... 23,404 40,993(a) 64,397 84 1,908
Corporate general and administrative expenses.......... 7,629 1,479(a) 9,108 13,645
Unusual charges........................................ 417
Special bonuses........................................ 2,303 2,303
---------- ----------- ------------ ---------- ----------
Operating income (loss)............................ 39,360 23,782 63,142 4,090 4,968
Interest expense....................................... (32,244) (46,232)(b) (78,476) (102)
Gain on sale of radio stations and other assets........ 2,539 2,539
Write-off of debt issuance costs....................... (1,949)
Other income (expense), net............................ 5,716 5,716 488 1,217
---------- ----------- ------------ ---------- ----------
Income (loss) before income taxes and extraordinary
items............................................ 15,371 (22,450) (7,079) 4,578 4,134
---------- ----------- ------------ ---------- ----------
Income tax (expense) benefit........................... (7,300) 6,629(h) (671) (1,698)
---------- ----------- ------------ ---------- ----------
Income (loss) before extraordinary items........... $ 8,071 $(15,821) $ (7,750) $ 4,578 $ 2,436
---------- ----------- ------------ ---------- ----------
---------- ----------- ------------ ---------- ----------
Income (loss) per common share..................... $ 0.30
----------
----------
Number of common shares used in per share
computations......................................... 26,830
----------
----------
<CAPTION>
LTM ENDED
MARCH 31,
1997
---------
PREMIERE ACQUISITION TOTAL TOTAL
PRO FORMA PRO FORMA COMBINED COMBINED
ADJUSTMENTS ADJUSTMENTS PRO FORMA PRO FORMA
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Net revenue............................................ $ 7,852(c) $523,169 $533,627
Broadcast operating expenses........................... 5,932(c) $ 2,606(d) 359,793 368,124
Depreciation and amortization.......................... 2,400(c) 18,426(e) 87,215 88,020
Corporate general and administrative expenses.......... (13,645)(d) 9,108 10,190
Unusual charges........................................ (417)(f)
Special bonuses........................................ 2,303 2,303
----------- ----------- --------- ---------
Operating income (loss)............................ (480) (6,970) 64,750 64,990
Interest expense....................................... 3,091(b) (75,487) (75,487)
Gain on sale of radio stations and other assets........ 2,539 4,695
Write-off of debt issuance costs....................... 1,949(g)
Other income (expense), net............................ (632)(c) 6,789 6,855
----------- ----------- --------- ---------
Income (loss) before income taxes and extraordinary
items............................................ (1,112) (1,930) (1,409) 1,053
----------- ----------- --------- ---------
Income tax (expense) benefit........................... 354(c) (755)(h) (2,770) (1,743)
----------- ----------- --------- ---------
Income (loss) before extraordinary items........... $ (758) $ (2,685) $ (4,179) $ (690)
----------- ----------- --------- ---------
----------- ----------- --------- ---------
Income (loss) per common share..................... $ (0.09) $ (0.02)
--------- ---------
--------- ---------
Number of common shares used in per share
computations......................................... 45,382(n) 45,382
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
29
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
------------------------------------------------------
OTHER JACOR
ACQUISITIONS OTHER
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL
JACOR ADJUSTMENTS PRO FORMA EFM
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net revenue....................................... $ 88,828 $ 11,151(a) $ 99,979 $11,191
Broadcast operating expenses...................... 67,305 9,956(a) 77,261 6,833
Depreciation and amortization..................... 13,369 3,411(a) 16,780 16
Corporate general and administrative expenses..... 2,762 2,762 1,146
---------- ----------- ------------ ----------
Operating income (loss)....................... 5,392 (2,216) 3,176 3,196
Interest expense.................................. (17,176) (2,353)(b) (19,529)
Gain on sale of radio stations and other assets... 4,695 4,695
Other income (expense), net....................... 405 405 6
---------- ----------- ------------ ----------
Income (loss) before income taxes and
extraordinary items......................... (6,684) (4,569) (11,253) 3,202
---------- ----------- ------------ ----------
Income tax (expense) benefit...................... 4,100 1,781(h) 5,881
---------- ----------- ------------ ----------
Income (loss) before extraordinary items...... $ (2,584) $ (2,788) $ (5,372) $ 3,202
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
Loss per common share......................... $ (0.08)
----------
----------
Number of common shares used in per share
computations.................................... 34,085
----------
----------
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
1996
---------
ACQUISITION TOTAL TOTAL
HISTORICAL PRO FORMA COMBINED COMBINED
PREMIERE ADJUSTMENTS PRO FORMA PRO FORMA
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Net revenue....................................... $ 7,190 $118,360 $107,902
Broadcast operating expenses...................... 5,163 $ 650(d) 89,907 81,576
Depreciation and amortization..................... 1,073 4,632(e) 22,501 21,696
Corporate general and administrative expenses..... (1,146)(d) 2,762 1,680
---------- ----------- --------- ---------
Operating income (loss)....................... 954 (4,136) 3,190 2,950
Interest expense.................................. 773(b) (18,756) (18,756)
Gain on sale of radio stations and other assets... 4,695 2,539
Other income (expense), net....................... 170 581 515
---------- ----------- --------- ---------
Income (loss) before income taxes and
extraordinary items......................... 1,124 (3,363) (10,290) (12,752)
---------- ----------- --------- ---------
Income tax (expense) benefit...................... (461) 964(h) 6,384 5,357
---------- ----------- --------- ---------
Income (loss) before extraordinary items...... $ 663 $ (2,399) $ (3,906) $ (7,395)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
Loss per common share......................... $ (0.09) $ (0.16)
--------- ---------
--------- ---------
Number of common shares used in per share
computations.................................... 45,382(n) 45,382
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
30
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------------------------------------------
OTHER JACOR
ACQUISITION OTHER
HISTORICAL PRO FORMA ACQUISITIONS HISTORICAL HISTORICAL
JACOR ADJUSTMENTS PRO FORMA EFM(O) PREMIERE
---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 12,418 $ (6,831)(j) $ 5,587 $ 4,868 $11,584
Accounts receivable............................. 86,326 156(i) 86,482 2,220 6,973
Prepaid expenses and other current assets....... 17,081 754(i) 17,835 7,283 2,049
---------- ----------- ------------ ---------- ----------
Total current assets........................ 115,825 (5,921) 109,904 14,371 20,606
Property and equipment............................ 157,631 27,418(i) 185,049 153 2,375
Intangible assets................................. 1,531,138 209,732(i) 1,740,870 29,405
Other assets...................................... 87,827 (24,174)(i) 54,653 33 5,632
(9,000)(j)
---------- ----------- ------------ ---------- ----------
Total assets................................ $1,892,421 $198,055 $2,090,476 $ 14,557 $58,018
---------- ----------- ------------ ---------- ----------
---------- ----------- ------------ ---------- ----------
Current liabilities:
Accounts payable, accrued expenses and other
current liabilities........................... $ 65,496 $ 1,199(i) $ 66,695 $ 11,155 $ 3,354
Long-term debt, current portion................. 8,500 8,500
---------- ----------- ------------ ---------- ----------
Total current liabilities................... 73,996 1,199 75,195 11,155 3,354
Long-term debt.................................... 688,500 173,000(j) 861,500
5 1/2% Liquid Yield Option Notes.................. 120,183 120,183
Other liabilities................................. 111,035 1,206(i) 112,241 3,322 1,825
Deferred tax liability............................ 302,884 302,884 3,726
Shareholders' equity:
Common stock ................................... 348 9(j) 357 2 79
Additional paid-in capital...................... 538,564 22,641(j) 561,205 40,997
Common stock warrants........................... 31,500 31,500
Unrealized gain on investments.................. 8,191 8,191
Retained earnings............................... 17,220 17,220 78 8,037
---------- ----------- ------------ ---------- ----------
Total shareholders' equity.................. 595,823 22,650 618,473 80 49,113
---------- ----------- ------------ ---------- ----------
Total liabilities and shareholders'
equity..................................... $1,892,421 $198,055 $2,090,476 $ 14,557 $58,018
---------- ----------- ------------ ---------- ----------
---------- ----------- ------------ ---------- ----------
<CAPTION>
ACQUISITION TOTAL
PRO FORMA COMBINED
ADJUSTMENTS PRO FORMA
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $(15,446)(l) $ 6,593
Accounts receivable............................. 95,675
Prepaid expenses and other current assets....... 27,167
----------- ----------
Total current assets........................ (15,446) 129,435
Property and equipment............................ 528(k) 188,105
Intangible assets................................. 200,079(k) 1,970,354
Other assets...................................... 60,318
----------- ----------
Total assets................................ $185,161 $2,348,212
----------- ----------
----------- ----------
Current liabilities:
Accounts payable, accrued expenses and other
current liabilities........................... $ 81,204
Long-term debt, current portion................. 8,500
----------
Total current liabilities................... 89,704
Long-term debt.................................... $(72,000)(l) 789,500
5 1/2% Liquid Yield Option Notes.................. 120,183
Other liabilities................................. 117,388
Deferred tax liability............................ 12,000(k) 318,610
Shareholders' equity:
(81)(m)
Common stock ................................... 101(l) 458
Additional paid-in capital...................... (40,997)(m) 855,458
294,253(l)
Common stock warrants........................... 31,500
Unrealized gain on investments.................. 8,191
Retained earnings............................... (8,115)(m) 17,220
----------- ----------
Total shareholders' equity.................. 245,161 912,827
----------- ----------
Total liabilities and shareholders'
equity..................................... $185,161 $2,348,212
----------- ----------
----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
31
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1997
(IN THOUSANDS)
(a) These adjustments reflect additional revenues and expenses related to the
Other Acquisitions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------
BROADCAST DEPRECIATION
NET OPERATING AND CORPORATE G
REVENUE EXPENSES AMORTIZATION & A
--------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Noble............................................. $ 10,715 $ 9,062 $ 2,365 --
Citicasters....................................... 101,806 58,543 21,913 $ 1,479
Gannett........................................... 2,202 6,727 -- --
Regent............................................ 33,797 26,447 6,897 --
Other............................................. 71,853 53,340 9,818 --
--------- ----------- ------------- -----------
Total......................................... $ 220,373 $ 154,119 $ 40,993 $ 1,479
--------- ----------- ------------- -----------
--------- ----------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------
BROADCAST DEPRECIATION
NET OPERATING AND
REVENUE EXPENSES AMORTIZATION
--------- ----------- -------------
<S> <C> <C> <C> <C>
Regent............................................ -- $ 233 $ 1,145
Other............................................. $ 11,151 9,723 2,266
--------- ----------- -------------
11,151 9,956 3,411
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
(b) These adjustments represent additional interest expense associated with
Jacor's borrowings under the Credit Facility, the issuance of the 10 1/8%
Notes, 9 3/4% Notes and Liquid Yield Option Notes, which proceeds were used
to finance acquisitions. The assumed interest rate under the Credit Facility
was 7 1/8%, which represents the rate as of April 1997.
(c) These adjustments represent additional revenues and expenses related to
Premiere's acquisitions of After MidNite Entertainment, completed January
1997, and Cutler Productions, SJM Productions and Philadelphia Music Works
("PMW"), which were completed at various dates during the second half of
1996.
(d) These adjustments represent the elimination of $11,039 and $1,146 of
corporate expenses related to the EFM Acquisition and the reclassification
of $2,606 and $650 in operating expenses for the year ended December 31,
1996 and the three months ended March 31, 1997, respectively, to conform
with Jacor's reporting practices. The elimination of expenses is due
primarily to salaries of the selling shareholder whose employment was not
continued.
(e) These adjustments reflect the additional depreciation and amortization
expense resulting from the allocation of Jacor's purchase price to the
assets acquired in the Premiere Merger and the EFM Acquisition including, an
increase in property and equipment and identifiable intangible assets, to
their estimated fair market values and the goodwill associated with the
acquisition of Premiere. Goodwill is amortized over 40 years.
(f) These adjustments represent costs recorded by Premiere related to certain
attempted business acquisitions and the assimilation of completed business
acquisitions, including miscellaneous severance, professional fees and
transition costs.
(g) These adjustments represent the elimination of debt issuance costs written
off by Premiere in 1996.
(h) To provide for the tax effect of pro forma adjustments using an estimated
statutory tax rate of 40%. The acquisition adjustments described in Note (a)
include non-deductible goodwill amortization estimated to be approximately
$5,000 for the year ended December 31, 1996 and $1,250 for the three months
ended March 31, 1997. The acquisition adjustments for the Premiere Merger
include non-deductible goodwill amortization estimated to be approximately
$3,800 for the year ended December 31, 1996 and $950 for the three months
ended March 31, 1997.
(i) These adjustments represent the allocation of the purchase price of the
Other Acquisitions to the estimated fair value of the assets acquired and
liabilities assumed, and the recording of goodwill associated with the
acquisitions. Previously funded escrow deposits of $24,174 were allocated as
part of the purchase price.
32
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1997
(IN THOUSANDS)
(j) The adjustment represents the issuance of stock, and Credit Facility
borrowings to finance the Other Acquisitions.
<TABLE>
<CAPTION>
OTHER
ACQUISITIONS
-----------
<S> <C>
Common Stock Issued.................................................................. $ 22,650
Credit Facility Borrowings........................................................... 173,000
-----------
Total............................................................................ $ 195,650
-----------
-----------
</TABLE>
The Company utilized $6,831 in excess cash and $9,000 of proceeds from the
sale of an investment to finance, in part, the Other Acquisitions.
(k) The adjustments represent the allocation of the purchase price of the EFM
Acquisition and the Premiere Merger to the estimated fair value of the
assets acquired and liabilities assumed, and the recording of goodwill
associated with these acquisitions.
(l) The adjustment represents the proceeds from the Offering, the net proceeds
from the 1997 Equity Offerings, to be utilized in part to finance a portion
of the Premiere Merger Consideration, and the issuance of stock to the
Premiere stockholders, borrowings under the Credit Facility to finance the
EFM Acquisition and excess cash utilized to pay down Credit Facility
borrowings.
<TABLE>
<CAPTION>
EFM PREMIERE OFFERING TOTAL
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
1997 Equity Offerings Net Proceeds.................... -- $ 245,554 -- $ 245,554
Common Stock Issued to Premiere Stockholders.......... -- 48,800 -- 48,800
Offering Proceeds..................................... -- -- 150,000 150,000
Credit Facility Borrowings (repayments)............... $ 50,000 (122,000) (150,000) (222,000)
Excess Cash Utilized.................................. -- 15,446 -- 15,446
--------- ----------- ----------- ---------
$ 50,000 $ 187,800 $ 0 $ 237,800
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------
</TABLE>
Common Stock issued to Premiere stockholders includes Jacor stock options
issued to certain Premiere option holders valued at $5,700.
(m) The adjustments represent the elimination of historical stockholders' equity
of the EFM Companies and Premiere as these acquisitions will be accounted
for as purchases.
(n) The pro forma weighted average shares outstanding includes all shares of
Common Stock outstanding at December 31, 1996 and March 31, 1997 and the
shares issued in the 1997 Equity Offerings, the shares issued in conjunction
with the acquisition of Regent and the shares issued to the Premiere
stockholders. The pro forma weighted average shares of Jacor do not reflect
any outstanding options and warrants as they are antidilutive.
(o) The historical balance sheet for the EFM Companies has been prepared as of
December 31, 1996, the latest date for which a historical balance sheet was
available. The historical balance sheet of the EFM Companies is not material
to the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
33
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF JACOR
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected consolidated financial data for Jacor presented below for, and
as of the end of each of the years in the five-year period ended December 31,
1996, is derived from Jacor's Consolidated Financial Statements which have been
audited by Coopers & Lybrand L.L.P., independent accountants. The consolidated
financial statements at December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 and the auditors' report thereon are
included elsewhere in this Prospectus/Information Statement. The selected
financial data as of March 31, 1997 and for the three months ended March 31,
1996 and 1997 are unaudited. In the opinion of Jacor's management, the unaudited
financial statements from which such data have been derived include all
adjustments (consisting only of normal, recurring adjustments) which are
necessary for a fair presentation of results of operations for such periods.
This selected consolidated financial data should be read in conjunction with the
"Unaudited Pro Forma Financial Information." Comparability of Jacor's historical
consolidated financial data has been significantly impacted by acquisitions,
dispositions and the recapitalization and refinancing completed in the first
quarter of 1993.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA(1):
Net revenue................................... $ 70,506 $ 89,932 $ 107,010 $ 118,891 $ 223,761 $ 30,074 $ 88,828
Broadcast operating expenses.................. 55,782 69,520 80,468 87,290 151,065 23,871 67,305
--------- --------- --------- --------- --------- --------- ---------
Station operating income excluding
depreciation and amortization............... 14,724 20,412 26,542 31,601 72,696 6,203 21,523
Depreciation and amortization................. 6,399 10,223 9,698 9,483 23,404 2,619 13,369
Reduction in carrying value of assets to net
realizable value............................ -- 8,600 -- -- --
Corporate general and administrative
expenses.................................... 2,926 3,564 3,361 3,501 7,629 1,139 2,762
Special Bonuses............................... -- -- -- -- 2,303 -- --
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)....................... (3,201) 6,625 13,483 18,617 39,360 2,445 5,392
Net interest income (expense)................. (13,443) (2,476) 684 (184) (26,528) (1,884) (17,176)
Gain on sale of radio stations................ 2,539 2,539 4,695
Other non-operating expenses, net............. (7,057) (11) (2) (168) 405
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income tax and extraordinary item.... $ (23,701) $ 4,138 $ 14,165 $ 18,265 $ 15,371 $ 3,101 $ (6,684)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations after
income tax but before extraordinary items
and the cumulative effect of accounting
changes..................................... $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 8,071 $ 1,842 $ (2,584)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................. $ (23,701) $ 1,438 $ 7,852 $ 10,965 $ 5,105 $ 891(2) $ (8,140)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per common share(3):
Primary and fully diluted................... $ (61.50) $ 0.10 $ 0.37 $ 0.52 $ 0.19 $ 0.04 $ (0.24)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding(3):
Primary and fully diluted................... 381 14,505 21,409 20,913 26,830 20,503 34,085
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER FINANCIAL DATA(1):........................
Broadcast cash flow(4)........................ $ 14,724 $ 20,412 $ 26,542 $ 31,601 $ 72,696 $ 6,203 $ 21,523
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Broadcast cash flow margin(5)................. 20.9% 22.7% 24.8% 26.6% 32.5% 20.6% 24.2%
EBITDA(4)..................................... $ 11,798 $ 16,848 $ 23,181 $ 28,100 $ 62,764 $ 5,069 $ 18,761
Capital expenditures.......................... 915 1,495 2,221 4,969 11,852 3,437 4,860
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------------- MARCH 31,
1992(6) 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital (deficit)..................... $(140,547) $ 38,659 $ 44,637 $ 24,436 $ 111,070 $ 41,829
Intangible assets (net of accumulated
amortization)............................... 70,038 84,991 89,543 127,158 1,290,172 1,531,138
Total assets.................................. 122,000 159,909 173,579 208,839 1,704,942 1,892,421
Total long-term debt (including current
portion).................................... 140,542 45,500 670,000 697,000
Common stock purchase warrants................ 1,383 390 390 388 26,500 31,500
Shareholders' equity (deficit)................ (50,840) 140,413 149,044 139,073 486,936 595,823
</TABLE>
- ------------------------------
(1) The comparability of the information reflected in this selected financial
data is affected by Jacor's purchase of radio station KBPI-FM (formerly
KAZY-FM), in Denver (July 1993); the purchase and interim operation of radio
station WOFX-FM (formerly WPPT-FM) under a local marketing agreement in
Cincinnati (April 1994); the purchase or radio stations WJBT-FM, WZAZ-AM,
and WSOL-FM (formerly WHJX-FM) in Jacksonville (August 1995); the purchase
of radio stations WDUV-FM and WBRD-AM in Tampa (August 1995); the Noble
acquisition and the Citicaster Merger in 1996; the sale of radio stations
WMJI-FM, in Cleveland and WYHY (FM), in Nashville (January 1991), the sale
of Telesat Cable TV (May 1994), the January 11, 1993 recapitalization plan,
that substantially modified Jacor's debt and capital structure (such
recapitalization was accounted for as if it had been completed January 1,
1993) and the March 1993 refinancing. For information related to
acquisitions in 1993, 1994 and 1995 see Notes 2 and 3 of Notes to
Consolidated Financial Statements. For information related to the
disposition during 1994, see Note 4 of Notes to Consolidated Financial
Statements.
(2) Net income for the year ended December 31, 1996 and the three months ended
March 31, 1996 includes, as extraordinary items, losses of approximately
$3.0 million and $1.0 million, respectively for the write-off of unamortized
costs associated with amended credit facilities.
(3) Income (loss) per common share for the two years ended December 31, 1992 is
based on the weighted average number of shares of Jacor Common Stock
outstanding and gives consideration to the dividend requirements of the
convertible preferred stock and accretion of the change in redemption value
of certain common stock warrants. Jacor's stock options and convertible
preferred stock were antidilutive and, therefore, were not included in the
computations. The redeemable common stock warrants were antidilutive for
1992 and were not included in the computations. Such warrants were dilutive
in 1991 using the "equity method" under Emerging Issues Task Force Issue No.
88-9 and, therefore, the common shares issuable upon conversion were
included in the 1991 computation. Income per share for the three years ended
December 31, 1996 is based on the weighted average number of common shares
outstanding and gives effect to both dilutive stock options and dilutive
stock purchase warrants during the periods. Income (loss) per common share
and weighted average shares outstanding for the year ended December 31, 1992
are adjusted to reflect the 0.0423618 reverse stock split in Jacor Common
Stock effected by the January 1993 recapitalization.
(4) "Broadcast cash flow" means operating income before reduction in carrying
value of assets, depreciation and amortization and corporate general and
administrative expenses. "EBITDA" means operating income before reduction in
carrying value of assets, depreciation and amortization. Broadcast cash flow
and EBITDA should not be considered in isolation from, or as a substitute
for, operating income, net income or cash flow and other consolidated income
or cash flow statement data computed in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity. Although this measure of performance is not calculated in
accordance with generally accepted accounting principles, it is widely used
in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a
consistent basis across companies without regard to depreciation and
amortization, which can vary significantly depending on accounting methods
(particularly where acquisitions are involved) or non-operating factors such
as historical cost bases. Broadcast cash flow also excludes the effect of
corporate general and administrative expenses, which generally do not relate
directly to station performance.
(5) Broadcast cash flow margin equals broadcast cash flow as a percentage of net
revenue.
(6) Pro forma amounts as of December 31, 1992, to give effect to the January 11,
1993 recapitalization plan that substantially modified Jacor's debt and
capital structure (in 000s):
<TABLE>
<S> <C>
Working capital.................................................................. $ 15,933
Intangible assets (net of accumulated amortization).............................. 82,857
Total assets..................................................................... 142,085
Long-term debt................................................................... 64,178
Common stock purchase warrants................................................... 403
Shareholders' equity............................................................. 50,890
</TABLE>
35
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
OF THE STATIONS
The selected financial data for the Stations presented below for, and as of
the end of each of the years in the two-year period ended December 31, 1996, is
derived from the Stations' Combined Financial Statements, which are unaudited
for the year ended December 31, 1995 and audited for the year ended December 31,
1996 by Arthur Andersen LLP, independent public accountants. The Combined
Financial Statements and the auditors' report thereon for the year ended
December 31, 1996 are included elsewhere in this Prospectus/Information
Statement. The selected financial data as of March 31, 1997 and for the three
months ended March 31, 1996 and 1997 are unaudited. In the opinion of Secret's
management, the unaudited financial statements from which such data have been
derived include all adjustments (consisting only of normal, recurring
adjustments) which are necessary for a fair presentation of results of
operations for such periods. This selected consolidated financial data should be
read in conjunction with the "Unaudited Pro Forma Financial Information."
WLTF-FM/WTAM-AM, CLEVELAND
CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------- -------------------------------------
1996 1995 1997 1996
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net revenue......................... $ 9,719,580 3% $ 9,414,665 $ 1,806,570 -2% $ 1,837,694
Broadcast operating expenses........ 7,774,873 3% 7,534,324 1,775,698 -15% 2,085,247
Depreciation/amortization........... 1,054,304 -9% 1,154,579 278,445 5% 265,453
Central office general and
administrative expenses........... 712,779 11% 644,383 243,922 68% 145,558
------------ ------------ ------------ ------------
Operating income.................... 177,624 118% 81,379 (491,495) (658,564)
Interest expense.................... 540,390 -15% 637,461 125,780 -7% 134,722
------------ ------------ ------------ ------------
Loss before income taxes............ (362,766) (556,082) (617,275) (793,286)
Income taxes........................ 42,500 -5% 44,646 10,625 0% 10,625
------------ ------------ ------------ ------------
Net income.......................... $ (405,266) $ (600,728) $ (627,900) $ (803,911)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
36
<PAGE>
WLTF-FM/WTAM-AM, CLEVELAND
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996
DECEMBER 31, ------------- MARCH 31,
1995 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 2,000 $ 2,000 $ 2,000
Accounts receivable (net of allowance for doubtful accounts of
$100,000, $100,000 and $86,035, respectively)................... 2,074,005 2,156,463 1,493,312
Trade receivables................................................. 63,768 73,495 99,109
Prepaid expenses.................................................. 181,905 131,633 182,274
------------- ------------- -------------
Total current assets............................................ 2,321,678 2,363,591 1,776,695
------------- ------------- -------------
PROPERTY AND EQUIPMENT, net......................................... 1,363,185 1,274,235 1,224,815
INTANGIBLE ASSETS, net.............................................. 15,486,164 14,668,620 14,460,764
------------- ------------- -------------
TOTAL ASSETS........................................................ $ 19,171,027 $ 18,306,446 $ 17,462,274
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued expenses............................. $ 514,430 $ 618,078 $ 552,755
Trade payables.................................................... 34,201 51,416 41,956
Interest payable.................................................. 19,509 27,960 7,555
Current maturities of long-term debt.............................. -- 481,671 565,294
------------- ------------- -------------
Total current liabilities....................................... 568,140 1,179,125 1,167,560
------------- ------------- -------------
LONG-TERM DEBT, less current maturities............................. 7,704,753 7,122,586 7,038,963
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL AND STATION EQUITY
Balance, beginning of period...................................... 10,524,881 10,898,135 10,004,735
Net amounts transferred to central office......................... (1,388,809) (1,766,949) (412,915)
Contributed capital............................................... 2,362,790 1,278,815 291,831
Net loss for the period........................................... (600,728) (405,266) (627,900)
------------- ------------- -------------
Balance, end of period............................................ 10,898,134 10,004,735 9,255,751
------------- ------------- -------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL............................. $ 19,171,027 $ 18,306,446 $ 17,462,274
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
37
<PAGE>
BUSINESS OF JACOR
Jacor, upon consummation of the Pending Transactions, will be the third
largest radio group in the nation as measured by revenue and will be the
country's fourth largest provider of syndicated radio programming. Jacor's
strategic objective is to maximize revenue and broadcast cash flow by becoming
the leading radio broadcaster in geographically diverse broadcast areas and by
leveraging its expertise in programming production, syndication and
distribution.
The Company will own and/or operate 153 radio stations and one television
station in 33 broadcast areas across the United States upon consummation of the
Pending Transactions. The Company's broadcast areas, as a group, are among the
most attractive in the country, demonstrating radio revenue growth in excess of
the radio industry average over the last five years. Jacor also produces 54
syndicated programs and services for more than 4,000 radio stations, which
programs include RUSH LIMBAUGH and DR. DEAN EDELL, the number one and number
three rated radio programs in the United States, respectively.
Jacor's principal executive offices are located at 50 East RiverCenter
Boulevard, 12th Floor, Covington, Kentucky 41011 and its telephone number is
(606) 655-2267.
BROADCASTING SERVICES ACQUISITIONS
PREMIERE MERGER. In June 1997, pursuant to an Agreement and Plan of Merger
dated as of April 7, 1997 by and among Jacor, JCC, PRN Holding Acquisition
Corp., a Delaware corporation ("Acquisition Corp.") and newly-formed subsidiary
of JCC, and Premiere (the "Merger Agreement"), and a related stock purchase
agreement with Premiere's largest stockholder, Jacor acquired all of the
outstanding shares of Premiere. Premiere produces 52 syndicated programs and
services, and has over 6,300 contracts to broadcast its programming and to use
its services on more than 4,000 radio stations. Premiere distributes its
programs and services in exchange for commercial broadcast time that it can
resell to advertisers.
Pursuant to the terms of the Merger Agreement, Acquisition Corp. merged with
and into Premiere such that each outstanding share of Premiere capital stock
(other than Premiere shares held by Jacor, treasury shares and dissenting
shares, if any) were converted into the right to receive $13.50 in cash (the
"Cash Consideration") and .13778841 shares (the "Exchange Ratio") of Common
Stock (the "Stock Consideration," and together with the Cash Consideration, the
"Merger Consideration"). Premiere was the surviving company in the Premiere
Merger and is now a subsidiary of JCC.
In order to facilitate the Premiere Merger, JCC concurrently purchased all
of the outstanding shares of common stock of Archon Communications, Inc.
("Archon"), the largest stockholder of Premiere capital stock. Archon's
principal business activity is the ownership of Premiere common stock, Premiere
Class A common stock and options and warrants to acquire Premiere common stock.
For their shares in Archon, the Archon shareholders received an amount of cash
and Common Stock calculated in the same manner as the Merger Consideration
received by the other Premiere stockholders, plus cash equal to Archon's cash on
hand (net of Archon's liabilities) at closing.
The total Merger Consideration paid by Jacor, including payment for certain
Premiere warrants and stock options, aggregated approximately $189.8 million
inclusive of the amounts paid to the Archon shareholders as discussed in the
preceding paragraph. Of such amount, approximately $138.8 million was paid in
cash and the remainder was paid in 1,416,886 shares of Common Stock and 303,000
shares of Common Stock reserved for issuance pursuant to option agreements with
certain members of Premiere's management. The total net consideration paid by
Jacor, net of Premiere's cash on hand and excess working capital acquired by
Jacor in the Premiere Merger, was approximately $169.0 million.
EFM COMPANIES. In April 1997, Jacor acquired substantially all of the
assets relating to the broadcast distribution and related print and electronic
media publishing businesses (the "EFM Acquisition") of EFM Media Management,
Inc., EFM Publishing, Inc. and PAM Media, Inc. (collectively, the "EFM
Companies"). The business of the EFM Companies included the ownership and
distribution of the RUSH LIMBAUGH and DR. DEAN EDELL programs, syndicated talk
programming for radio broadcasting, which
38
<PAGE>
contracts were assigned to Jacor in the acquisition. Jacor paid $50.0 million in
cash for the assets of the EFM Companies.
The RUSH LIMBAUGH program, a nationally syndicated talk radio program, is
broadcast on more than 600 radio stations. The DR. DEAN EDELL program, a health
care and medicine talk radio program, is broadcast on more than 300 radio
stations.
NSN NETWORK SERVICES. Also in April 1997, Jacor acquired the assets of
Standard Broadcast Service, Inc., a satellite systems integrator, Internet
service provider and communications consultant focused on the radio broadcasting
industry, which conducts business under the trade name NSN Network Services,
Ltd. ("NSN Network Services"). The purchase price paid by Jacor for the assets
of NSN Network Services was $11.0 million, of which approximately $9.3 million
was paid in cash and approximately $1.7 million was paid in 59,540 shares of
Common Stock.
The principal products and services of NSN Network Services include
satellite audio systems for radio broadcasting, Wide Area Network business
connectivity, Internet server systems and software, satellite remote telephone
systems and paging systems, and communications consulting. These technologies
will create efficiencies and lower costs related to the distribution of
programming among Jacor's radio stations. Further, these technologies will
enhance Jacor's back-office backbone to facilitate the sharing of financial data
and other communications. Jacor will also benefit from the significant
management expertise that it will acquire, which Jacor would have otherwise had
to obtain from third parties.
AIRWATCH ACQUISITION. In April 1997, Jacor acquired the assets of Airwatch
Communications, Inc. ("Airwatch") and Airtraffic Communications, Inc.
("Airtraffic") for a purchase price of approximately $18.0 million in cash.
Airwatch and Airtraffic provide traffic reporting services to radio broadcasting
companies, independent radio stations and television stations in the San Diego
and Los Angeles broadcast areas, respectively. Airwatch provides traffic report
services for 16 radio stations and six television stations, including two of
Jacor's radio stations in San Diego. Airtraffic provides traffic report services
for 26 radio stations and one television station in Los Angeles. Jacor's other
radio stations in San Diego currently obtain traffic report services from a
competitor of Airwatch and Airtraffic. Jacor intends to convert these other
stations in San Diego to Airwatch and market Airwatch and Airtraffic services to
other radio broadcasting and television companies.
RECENTLY COMPLETED RADIO STATION ACQUISITIONS AND DISPOSITIONS
In February 1996, Jacor entered into an agreement to acquire Citicasters
through a merger of a wholly owned Jacor subsidiary with and into Citicasters
(the "Citicasters Merger"). Citicasters owned and/or operated 19 radio stations,
located in Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati,
Sacramento, Columbus, and two television stations, one located in Tampa and one
in Cincinnati. The Citicasters Merger enhanced Jacor's existing station
portfolios in Atlanta, Tampa and Cincinnati and created new multiple radio
station platforms in Phoenix, Portland, Kansas City, Sacramento and Columbus.
Jacor consummated the Citicasters Merger in September 1996 for an approximate
aggregate value of $801.2 million, which included the purchase of all
outstanding shares of Citicasters common stock, the assumption of Citicasters
outstanding indebtedness and the issuance of warrants to purchase an aggregate
of 4,400,000 shares of Common Stock at an exercise price of $28.00 per full
share (the "Citicasters Warrants"). In order to complete the Citicasters Merger,
Jacor agreed with the Antitrust Division to divest WKRQ-FM in Cincinnati. As
described below, Jacor completed the transfer of WKRQ-FM in April 1997.
Also, in February 1996, Jacor entered into an agreement to acquire Noble,
which owned ten radio stations serving Denver, St. Louis and Toledo, and the
right to provide programming to and sell the air time for one AM and one FM
station serving the San Diego broadcast area (the "Noble Acquisition"). The
Noble Acquisition enhanced Jacor's existing portfolio in Denver where it now
owns eight stations, in addition to creating new multiple station platforms in
St. Louis and Toledo. Jacor consummated the Noble Acquisition in July 1996 for
an aggregate consideration of approximately $160.0 million in cash.
39
<PAGE>
Also, in February 1996, Jacor sold the business and certain operating assets
of radio stations WMYU-FM and WWST-FM in Knoxville to Heritage Media
Corporation. Jacor received approximately $6.5 million in cash for this sale,
generating a gain of approximately $2.5 million. In March 1996, Jacor entered
into an agreement for the sale of the assets of WBRD-AM in Tampa for
approximately $0.5 million in cash. The sale of WBRD-AM was completed in June
1996.
In March 1996, Jacor entered into an agreement to acquire from Asterisk
Radio, Inc. the FCC licenses of WCTQ-FM and WAMR-AM in Venice, Florida and to
purchase certain real estate and transmission facilities necessary to operate
the stations. In June 1996, Jacor consummated this acquisition for a purchase
price of approximately $4.4 million.
In May 1996, Jacor entered into an agreement with Enterprise Media of
Toledo, L.P. to acquire the FCC licenses of WIOT-FM and WCWA-AM in Toledo, Ohio
and to purchase real estate and transmission facilities necessary to operate the
stations. In April 1997, Jacor consummated this acquisition for a purchase price
of approximately $13.0 million.
In June 1996, Jacor entered into an agreement to acquire from Trumper
Communications of Kentucky, Limited Partnership and Trumper Communications, Inc.
the FCC licenses of WLAP-AM, WMXL-FM and WWYC-FM servicing Lexington, Kentucky
and to purchase real estate and transmission facilities necessary to operate the
stations. In August 1996, Jacor consummated this acquisition for a purchase
price of approximately $14.0 million.
In July 1996, Jacor entered into an agreement with New Wave Communications,
L.P. and New Wave Broadcasting, Inc. to acquire the FCC licenses of WSPB-AM,
WSRZ-FM and WYNF-FM in Sarasota, Florida and to purchase leasehold interests in
real estate and transmission facilities necessary to operate the stations. In
May 1997, Jacor consummated this acquisition for a purchase price of
approximately $12.9 million.
In August 1996, Jacor entered into agreements with Sarasota-Charlotte
Broadcasting Corporation to acquire certain assets, a construction permit and
related real estate for unconstructed radio station WEDD-FM in Englewood,
Florida for an aggregate purchase price of $0.8 million. Jacor completed this
transaction in February 1997.
In September 1996, Jacor entered into an agreement with a subsidiary of
Gannett Co., Inc. ("Gannett") to effect a tax-free like-kind exchange of Jacor's
Tampa television station, WTSP-TV, acquired by Jacor in the Citicasters Merger,
for six of Gannett's radio stations (the "Gannett Exchange"). Jacor and Gannett
consummated the Gannett Exchange in December 1996. The stations Jacor acquired
are KIIS-FM and KIIS-AM in Los Angeles, KSDO-AM and KKBH-FM in San Diego and
WUSA-FM and WDAE-AM in Tampa-St. Petersburg (the "Selected Gannett Radio
Stations"). The Company renamed WUSA-FM to WAKS-FM as Gannett retained the
WUSA-FM call letters. The Gannett Exchange enhanced Jacor's existing station
portfolios in San Diego and Tampa and created a new multiple radio station
platform in the Los Angeles broadcast area. In connection with the closing of
the Gannett Exchange, Jacor and Gannett agreed to value the exchanged assets at
$170.0 million for tax purposes.
In October 1996, Jacor entered into an agreement with Clear Channel Radio,
Inc. ("Clear Channel") to purchase KTWO-AM, KMGW-FM and the Wyoming Radio
Network in Casper, Wyoming for a purchase price of $1.9 million. In December
1996, Jacor and Clear Channel consummated the transaction. Also, in October
1996, Jacor entered into a binding agreement with Colfax Communications, Inc.
("Colfax") to acquire KIDO-AM and KLTB-FM in Boise, Idaho and KARO-FM in
Caldwell, Idaho for a purchase price of $11.0 million. Jacor and Colfax
consummated the transaction in January 1997.
Also, in October 1996, Jacor entered into an agreement to acquire Regent
through a merger of Regent with and into Jacor (the "Regent Merger"). Regent
owned, operated or represented 19 radio stations located in Kansas City, Salt
Lake City, Las Vegas, Louisville and Charleston. During February 1997, Jacor
consummated the Regent Merger for the approximate aggregate value of $179.9
million, which included (i) the issuance of approximately 3,550,000 shares of
Common Stock valued at $105.9
40
<PAGE>
million, (ii) the issuance of warrants to acquire 500,000 shares of Common Stock
at $40 per share valued at
$5.0 million (the "Regent Warrants"), (iii) the repayment of approximately $64.0
million of debt, and (iv) approximately $5.0 million in cash. The Regent Merger
enhanced Jacor's existing station portfolio in Kansas City and created new
multiple radio station platforms in Salt Lake City, Las Vegas, Louisville and
Charleston. In April 1997, Jacor completed the purchase of KBGO-FM (formerly
KEYV-FM) in Las Vegas, Nevada for a purchase price of approximately $3.0
million, pursuant to an agreement originally entered into by Regent prior to the
closing of the Regent Merger.
Also, in October 1996, Jacor entered into an agreement with Palmer
Broadcasting Limited Partnership whereby Jacor would acquire the FCC licenses
and assets of WHO-AM and KLYF-FM in Des Moines and WMT-AM and WMT-FM in Cedar
Rapids for a purchase price of $52.5 million in cash. The transaction was
completed in March 1997.
Also, in October 1996, Jacor entered into an agreement with Nationwide
Communications, Inc. ("Nationwide") to effect a tax-free like-kind exchange of
the assets of Jacor's two radio stations in Phoenix, KSLX-AM and KSLX-FM, for
the assets of two of Nationwide's radio stations in San Diego, KGB-FM and
KPOP-AM. The assets exchanged were valued by Jacor and Nationwide at
approximately $45.0 million. This exchange of assets was consummated in April
1997.
Also, in October 1996, Jacor entered into agreements with Par Broadcasting
Company, Inc. and Par Broadcasting Company (collectively, "Par") to purchase
four radio stations in San Diego, KOGO-AM, KCBQ-AM, KIOZ-FM and KKLQ-FM, for
$72.0 million in cash (the "Par Transaction"), and with Entertainment
Communications, Inc. ("Entercom") to sell two radio stations in Sacramento,
KSEG-FM and KRXQ-FM, for $45.0 million in cash (the "Entercom Transaction").
Although not directly contingent upon each other, these transactions occured in
a manner that permits them to be treated as a tax-free like-kind exchange. Also,
in connection with the Par Transaction, and the Entercom Transaction, Jacor
entered into an agreement in April 1997 to sell KCBQ-AM to JS Communications,
Inc., which has subsequently changed its name to Regent Communications, Inc.
("JSCI") for a sale price of $6.0 million. These transactions were consummated
in June 1997.
In November 1996, Jacor entered into an agreement with Sarape
Communications, Inc. to acquire the FCC licenses and assets of KBAI-AM in Morro
Bay, California for a purchase price of approximately $0.2 million. This
transaction was consummated in February 1997.
Also, in November 1996, Jacor entered into an agreement with Stanford
Capital Communications, Inc. ("Stanford") to acquire the FCC licenses and
operating assets of radio stations WKQQ-FM in Lexington, Kentucky and WXZZ-FM
and WTKT-AM in Georgetown, Kentucky (the "Stanford Transaction") for a purchase
price of $24.1 million in cash. This transaction was consummated in July 1997
upon receipt of an initial consent from the FCC, which consent has not yet
become a final order.
In December 1996, Jacor entered into an agreement with American Radio
Systems Corporation and American Radio Systems License Corp. (together, "ARS")
to effect a tax-free like-kind exchange of Jacor's assets of WKRQ-FM, licensed
to Cincinnati, for ARS's assets of WVOR-FM, WHAM-AM and WHTK-AM, licensed to
Rochester, New York, and $16.0 million in cash. This exchange of assets was
consummated in April 1997.
Also, in December 1996, Jacor entered into an agreement whereby Jacor
acquired the FCC licenses and assets of WJCM-AM in Sebring, Florida from Rumbuat
Management, Inc. for a purchase price of $0.2 million. This transaction was
consummated in April 1997.
Also, in December 1996, Jacor entered into an agreement with Tel Lease, Inc.
to acquire the FCC licenses and assets of WAZU-FM (formerly WAHC-FM), licensed
to Circleville, Ohio, and WHQK-FM (formerly WAKS-FM), licensed to Marysville,
Ohio. In May 1997, Jacor consummated this acquisition for a purchase price of
approximately $8.3 million.
41
<PAGE>
Also in December 1996, Jacor entered into two separate agreements to acquire
the FCC licenses and assets of (i) KGLL-FM in Greeley, Colorado from Duchossois
Communications Company of Colorado, Inc. and (ii) KCOL-AM and KPAW-FM in Fort
Collins, Colorado from University Broadcasting Company, L.P. for an aggregate
purchase price of approximately $7.2 million. These transactions were
consummated in June 1997.
In January 1997, Jacor entered into an agreement with The Great Lakes
Wireless Talking Machine, LLP to acquire WNVE-FM in Rochester, New York for a
purchase price of $5.5 million in cash. This transaction was consummated in
April 1997.
Also, in January 1997, Jacor entered into two separate agreements with
entities affiliated with James E. Champlin to acquire the FCC licenses and
assets of WLRS-FM, licensed to Louisville, Kentucky, and WMCC-FM and WLOC-AM,
licensed to Munfordville, Kentucky. In April 1997, Jacor consummated the
Louisville acquisition for a purchase price of $5.1 million. In May 1997, Jacor
consummated the Munfordville acquisition for a purchase price of $0.3 million.
Also, in January 1997, Jacor entered into an agreement to acquire (i)
WIMA-AM and WIMT-FM, licensed to Lima, Ohio; (ii) WBUK-FM, licensed to Ft.
Shawnee, Ohio; and (iii) the construction permit for WLVZ-FM, licensed to St.
Mary's, Ohio, from Lima Broadcasting Co. for an aggregate purchase price of $6.5
million. This transaction was consummated in May 1997.
Also, in January 1997, Jacor entered into an agreement with an entity
affiliated with James E. Champlin to acquire the FCC licenses and assets of
WLKT-FM, licensed to Lexington, Kentucky for a purchase price of $5.1 million.
This transaction was consummated in July 1997 upon receipt of an intital consent
from the FCC, which consent has not yet become a final order.
In February 1997, Jacor entered into an agreement to acquire the assets of
radio station KOTK-AM, licensed to Portland, Oregon, from EXCL Communications,
Inc. and Portland Radio, Inc. for a purchase price of $8.3 million. This
transaction was consummated in May 1997.
Also, in February 1997, Jacor entered into three separate agreements to
acquire from Auburn Cablevision, Inc. and certain of its subsidiaries the assets
of radio stations WMAX-FM, in Irondequoit, New York, WMHX-FM, in Canandaigua,
New York and WRCD-FM in Honeoye Falls, New York for an aggregate purchase price
of $7.0 million. This transaction was consummated in June 1997.
In March 1997, Jacor entered into an agreement to purchase the assets of
KQSB-AM and KTYD-FM in Santa Barbara, California and KSBL-FM in Carpinteria,
California from Criterion Media Group, Inc. for a purchase price of $13.5
million. This transaction was consummated in May 1997.
Also, in March 1997, Jacor entered into an agreement to purchase the assets
of radio station
KBKK-FM, Spanish Fork, Utah, from Garcia Broadcasting, L.L.C. for a purchase
price of $4.5 million. This transaction was consummated in July 1997.
In April 1997, Jacor entered into an agreement to acquire the assets of
WLEC-AM and WCPZ-FM in Sandusky, Ohio, for a purchase price of approximately
$7.7 million. This transaction was consummated in July 1997 upon receipt of an
initial consent from the FCC, which consent has not yet become a final order.
PENDING RADIO STATION TRANSACTIONS
All of the following pending radio station transactions are subject to
various conditions, including approval by the FCC. There can be no assurance
that Jacor will be successful in consummating all such transactions in a timely
manner or on the terms described herein. See "Risk Factors--Increased Antitrust
Scrutiny" and "--FCC Regulation of Broadcasting Industry."
In April 1997, Jacor entered into a binding agreement to sell WXZZ-FM to
JSCI for a sale price of $3.5 million to facilitate antitrust approval of the
Stanford Transaction and the Village Transaction. An FCC application relating to
the sale of WXZZ-FM was filed in April 1997, and initial FCC consent was
obtained in June 1997. In July 1997 Jacor and JSCI entered into a TBA with
respect to WXZZ-FM.
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In March 1997, Jacor entered into a binding agreement with BuenaVentura
Communications, Inc. to purchase the assets of radio station KAHS-AM in Thousand
Oaks, California for a purchase price of $0.4 million. The FCC has granted its
initial consent to this transaction. Also, in March 1997, Jacor entered into a
binding agreement to acquire, for the purchase price of $1.5 million, KLDZ-FM in
Santa Barbara, California upon such radio station going on the air. An FCC
application will not be filed with the FCC until KLDZ-FM is operating.
In April 1997, Jacor also entered into a binding agreement to purchase the
assets of radio station KFAM-AM, North Salt Lake City, Utah from General
Broadcasting, Inc. for a purchase price of $1.2 million, of which approximately
$0.1 million has been placed in escrow pending the closing of the transaction.
The FCC has granted its initial consent to this transaction, which has become a
final order.
In addition, in April 1997, Jacor entered into two separate binding
agreements with unaffiliated parties whereby Jacor will (i) sell the assets of
its radio stations WEZL-FM and WXLY-FM in Charleston, South Carolina to JSCI for
a sale price of approximately $13.5 million; and (ii) acquire the assets of
radio stations KIGN-FM, KOLZ-FM, KGAB-AM and KLEN-FM in Cheyenne, Wyoming from
Magic City Media, Inc. for a purchase price of approximately $5.5 million, of
which $0.8 million has been loaned to the seller. The FCC has granted its
initial consent to the Charleston transaction. A petition to deny was filed at
the FCC against the Cheyenne applications, which remain pending.
Further, in April 1997, Jacor entered into a binding agreement with LMS of
Boise, Inc. ("LMS") whereby Jacor will acquire the assets of KXLT-FM and KCIX-FM
in Boise, Idaho for a purchase price of approximately $8.0 million. Upon signing
the agreement, Jacor loaned an amount equal to the purchase price to LMS to
finance LMS's purchase of such stations. An FCC application was filed in May
1997, and initial consent was granted in July 1997, conditioned on the
transaction not being consummated until the renewal application for KXLT-FM and
KCIX-FM are granted.
In May 1997, Jacor entered into a binding agreement with LMS of Twin Falls,
Inc. ("LMST") and LMS Licenses, Inc. ("LMSL") to acquire LMST's and LMSL's
rights to acquire radio stations KEZJ-FM, KLIX-FM and KLIX-AM in Twin Falls,
Idaho pursuant to an Asset Purchase Agreement dated as of January 1997 between
Lartigue Multimedia Systems, Inc. (predecessor in interest to LMST and LMSL) and
B&B Broadcasting, Inc. ("B&B"). The FCC application for this transaction was
filed in June 1997. In connection with this transaction, Jacor loaned $7.2
million to B&B. The purchase price for the acquisition of the three radio
stations is $9.0 million, of which $1.8 million has been placed in escrow
pending the closing of the transaction. In a related transaction also in May
1997, Jacor entered into two binding agreements with LMS of Pocatello, Inc.
("LMSP") to acquire the assets of (i) radio stations KPKY-FM and KWIK-AM in
Pocatello, Idaho, for a purchase price of approximately $2.0 million, and (ii)
radio stations KID-FM and KID-AM in Idaho Falls, Idaho, for a purchase price of
approximately $1.6 million. In connection with these transactions, Jacor loaned
$3.6 million to LMSP. The FCC applications for these transactions were filed in
July 1997.
Also, in May 1997, Jacor entered into a binding agreement with Iowa City
Broadcasting Company, Inc. to acquire substantially all of the assets of radio
stations KXIC-AM and KKRQ-FM in Iowa City, Iowa, for a purchase price of $8.0
million, of which $0.4 million has been placed in escrow pending the closing of
the transaction. The FCC application for this transaction was filed in July
1997. Also, in May 1997, Jacor entered into a binding agreement with each of
Cardinal Communications, Inc. and Revival II, Inc. to acquire the FCC licenses
and assets of radio station KMXN-AM in Santa Rosa, California for a purchase
price of $0.1 million. The FCC application for this transaction was filed in
June 1997.
In addition, in May 1997, Jacor entered into a binding agreement with
Outback Broadcasting, Inc. to acquire the FCC licenses and assets of radio
stations WITS-AM and WYMR-FM in Sebring, Florida for a purchase price of
$700,000 of which $90,000 was paid upon execution of the agreement. An FCC
application was filed in May 1997.
In June 1997, Jacor entered into a binding agreement with ARS to effect a
tax-free like-kind exchange of Jacor's assets of WDAF-AM, KYYS-FM, KMXV-FM and
KUDL-FM in Kansas City for the assets of
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WMMX-FM, WTUE-FM, WLQT-FM, WXEG-FM, WBTT-FM and WONE-AM in Dayton, Ohio. No cash
is to be exchanged in this transaction. The FCC applications for this exchange
are expected to be filed in July 1997. This exchange is also subject to the
termination or expiration of the applicable waiting periods under the HSR Act.
In July 1997, Jacor entered into an option agreement with WKBN Broadcasting
Corp. for WKBN-FM and WKBN-AM in Youngstown, Ohio to acquire such stations for a
purchase price of approximately $11.0 million, $2.5 million of which will be
paid into escrow upon the commencement of a TBA on August 1, 1997. The FCC
application for this transaction is expected to be filed in September 1998.
BUSINESS STRATEGY
Jacor's strategic objective is to maximize revenue and broadcast cash flow
by becoming the leading radio broadcaster in geographically diverse broadcast
areas and by leveraging its expertise in programming production, syndication and
distribution. Jacor intends to acquire individual radio stations, radio groups
and/or businesses that provide radio broadcasting services that strengthen its
strategic position in the radio industry and enhance its operating performance.
Specifically, Jacor's business strategy centers upon:
BROADCAST AREA REVENUE LEADERSHIP. Jacor strives to maximize its audience
ratings in each of its broadcast areas in order to capture the largest share of
the radio advertising revenue in that area and to attract advertising away from
other media. Jacor believes that the most effective way to capture a higher
percentage of advertising revenue is to operate multiple radio stations within a
broadcast area, tailoring each station's programming to deliver highly effective
access to a target demographic. In implementing its multi-station strategy,
Jacor utilizes its programming expertise over a broad range of radio formats to
create distinct station personalities within a broadcast area. Jacor further
enhances its ability to increase its revenues through a more complete coverage
of the listener base by being an industry leader in successfully operating AM
stations.
STRATEGIC ACQUISITIONS OF COMPLEMENTARY STATIONS. Jacor focuses its
acquisition strategy on acquiring stations with powerful broadcast signals that
complement its existing portfolio and strengthen its overall competitive
position. By operating multiple stations within its broadcast areas, Jacor seeks
to position itself as the most efficient advertising medium in a geographic
location, providing advertisers with wide access to a variety of demographic
groups through a single purchase of advertising time. Through the acquisition of
additional stations within an existing broadcast area, Jacor spreads its fixed
costs over a larger base of stations and creates operating efficiencies enabling
it to generate higher broadcast cash flow. Jacor may enter additional broadcast
areas through acquisitions of radio groups that have multiple station platforms
and/or through acquisitions of individual stations in new locations where Jacor
believes a revenue-leading position can be created.
DEVELOPMENT OF REGIONAL CLUSTERS AROUND CORE BROADCAST AREAS. Jacor
believes it can leverage its position as the leader in a core broadcast area to
create additional revenue and cash flow opportunities by building regional
multi-station clusters around Jacor's core broadcast areas. Utilizing
programming from its core broadcast areas, Jacor provides its regional clusters
with high quality programming which would not otherwise be economically viable
in such smaller broadcast areas and spreads the costs associated with the
delivery of such programming across a greater number of stations. By improving
the ratings of its regional stations with such enhanced programming, Jacor
believes it can generate incremental revenue and broadcast cash flow. For
example, Jacor has utilized this strategy in the Denver broadcast area by
acquiring stations in Casper, Wyoming, Cheyenne, Wyoming, and Fort
Collins/Greeley, Colorado to develop a regional cluster.
DEVELOPMENT OF "STICK" PROPERTIES. In addition to acquiring developed, cash
flow producing stations, Jacor also strategically acquires underdeveloped
"stick" properties (I.E., properties with insignificant ratings and little or no
positive broadcast cash flow). Jacor believes that acquisitions of strategically
located "stick" properties often provide greater potential for revenue and
broadcast cash flow growth than do
44
<PAGE>
acquisitions of developed properties. Historically, Jacor has been able to
improve the ratings, revenue and cash flow of its "stick" properties with
increased marketing and focused programming that complement its existing radio
station formats. Additionally, Jacor increases the revenue and cash flow of
"stick" properties by encouraging advertisers to buy advertising in a package
with its more established stations. Jacor believes its current portfolio of over
50 "stick" properties creates significant potential for revenue and cash flow
growth. For example, in 1992 Jacor had a total of five "stick" stations which
contributed no broadcast cash flow. In 1996, Jacor had improved the broadcast
cash flow of these same five stations to $9.3 million.
ACQUISITIONS OF BROADCAST RELATED BUSINESSES. Jacor strengthens its
strategic position in the radio industry through the acquisition and operation
of businesses that provide services to radio broadcasting companies. Through the
acquisition of Premiere, Jacor will significantly expand its production and
distribution of syndicated radio programming for sale to both Jacor's radio
stations and other broadcasting companies. In addition, these services will
enhance the Company's ability to increase ratings for existing stations, rapidly
transform "stick" properties into cash flow producing properties and maintain
long-term relationships with Jacor's on-air talent. By combining the national
reach of the Company's radio stations with Premiere's network sales force, the
Company will maximize the commercial broadcast inventory that it can sell to
advertisers. In addition, Jacor will benefit from the distribution network
acquired with NSN Network Services, which network will create efficiencies and
lower costs related to the distribution of programming among the Company's radio
stations.
RADIO STATION OVERVIEW
The following table sets forth certain information as of June 20, 1997
regarding the Company and its broadcast areas (not including immaterial
acquisition agreements entered into by Jacor after April 30, 1997, see
"Transactions--Pending Radio Station Transactions"):
<TABLE>
<CAPTION>
BROADCAST AREA/ PENDING ACQUISITION TARGET
STATION(1) (P) FORMAT DEMOGRAPHIC
- -------------------- --------------------- ------------------------- -------------
<S> <C> <C> <C>
LOS ANGELES
KIIS-FM Contemporary Hit Radio Adults 18-34
KIIS-AM Sports Men 25-54
ATLANTA
WPCH-FM Adult Contemporary Women 25-54
WGST-AM/FM(2) News Talk Men 25-54
WKLS-FM Album Oriented Rock Men 18-34
SAN DIEGO(3)
KHTS-FM Rhythmic Hits Adults 18-34
KSDO-AM Talk Men 25-54
KKBH-FM Adult Contemporary Women 25-54
KOGO-AM News Talk Adults 25-54
KKLQ-FM Contemporary Hit Radio Adults 18-34
KIOZ-FM Album Oriented Rock Men 18-34
KGB-FM Classic Rock Men 25-54
KPOP-AM Nostalgia Adults 35-64
ST. LOUIS
KMJM-FM Urban Contemporary Adults 25-54
KATZ-FM Urban Adult Contemporary Adults 25-54
KATZ-AM Gospel Adults 35-64
TAMPA
WFLA-AM News Talk Adults 35-64
WFLZ-FM Contemporary Hit Radio Adults 18-34
WDUV-FM EZ/Nostalgia Adults 35-64
WXTB-FM Album Oriented Rock Men 18-34
WTBT-FM Classic Rock Men 18-34
WAKS-FM Hot Adult Contemporary Women 18-34
WDAE-AM Sports Men 25-54
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
BROADCAST AREA/ PENDING ACQUISITION TARGET
STATION(1) (P) FORMAT DEMOGRAPHIC
- -------------------- --------------------- ------------------------- -------------
<S> <C> <C> <C>
CLEVELAND
WLTF-FM P Adult Contemporary Women 25-54
WTAM-AM P News Talk Men 25-54
DENVER(4)
KOA-AM News Talk Men 25-54
KRFX-FM Classic Rock Men 25-54
KBPI-FM Rock Alternative Men 18-34
KTLK-AM Talk Adults 35-64
KHIH-FM Jazz Adults 25-54
KHOW-AM Talk Adults 25-54
KBCO-AM Talk Adults 25-54
KBCO-FM Album Oriented Rock Adults 25-54
PORTLAND
KEX-AM News Talk Adults 35-64
KKCW-FM Adult Contemporary Women 25-54
KKRZ-FM Contemporary Hit Radio Women 18-34
KOTK-AM(5) Talk Adults 35-64
CINCINNATI(4)
WLW-AM News Talk Men 25-54
WEBN-FM Album Oriented Rock Men 18-34
WOFX-FM Classic Rock Men 25-54
WKRC-AM Talk Adults 35-64
WWNK-FM Adult Contemporary Women 25-54
WAQZ-FM(2) Contemporary Alternative Adults 18-34
WSAI-AM(2) Nostalgia Adults 35-64
WAZU-AM(2) Info Radio Adults 25-54
COLUMBUS
WTVN-AM News Talk Adults 35-64
WLVQ-FM Album Oriented Rock Men 18-34
WHOK-FM Country Adults 25-54
WHQK-FM Country Adults 25-54
WLOH-AM Nostalgia Adults 35-64
WAZU-FM Rock Men 18-34
WZAZ-FM Alternative Adults 18-34
SALT LAKE CITY(4)
KALL-AM News Talk Adults 35-64
KODJ-FM Oldies Women 25-54
KKAT-FM Country Adults 25-54
KURR-FM New Rock Men 18-34
KZHT-FM Contemporary Hit Radio Women 18-34
KFAM-AM P Beautiful/EZ Adults 35-64
KBKK-FM(5) Country Adults 25-54
LAS VEGAS
KFMS-FM Country Adults 25-54
KWNR-FM Country Adults 25-54
KBGO-FM Oldies Women 25-54
KSNE-FM Adult Contemporary Women 25-54
ROCHESTER
WVOR-FM Adult Contemporary Adults 25-54
WHAM-AM News Talk Adults 25-54
WHTK-AM Talk Adults 35-64
WNVE-FM New Rock Men 18-34
WMAX-FM Alternative Adults 18-34
WMHX-FM Alternative Adults 18-34
WRCD-FM New Adult Contemporary Adults 25-54
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
BROADCAST AREA/ PENDING ACQUISITION TARGET
STATION(1) (P) FORMAT DEMOGRAPHIC
- -------------------- --------------------- ------------------------- -------------
<S> <C> <C> <C>
LOUISVILLE(4)
WDJX-FM Contemporary Hit Radio Adults 18-34
WFIA-AM Religion Adults 25-54
WVEZ-FM Soft Adult Contemporary Women 25-54
WSFR-FM Classic Rock Men 25-54
WLRS-FM Adult Contemporary Women 25-54
JACKSONVILLE
WJBT-FM Urban Adults 18-34
WQIK-FM Country Adults 25-54
WSOL-FM Urban Adult Contemporary Adults 25-54
WZAZ-AM Gospel Adults 35-64
WJGR-AM Talk Adults 25-54
TOLEDO
WSPD-AM News Talk Adult 35-64
WVKS-FM Contemporary Hit Radio Adults 18-34
WRVF-FM Adult Contemporary Women 25-54
WIOT-FM Album Oriented Rock Men 18-34
WCWA-AM Nostalgia Adults 35-64
SARASOTA/BRADENTON
WSRZ-FM Oldies Women 25-54
WYNF-FM Album Oriented Rock Men 25-54
WSPB-AM Business News Men 35-64
DES MOINES
WHO-AM News Talk Men 25-54
KLYF-FM Adult Contemporary Women 25-54
LEXINGTON
WMXL-FM Hot Adult Women 18-34
WWYC-FM Country Adults 18-34
WLAP-AM Sports Men 25-54
WKQQ-FM(5) Album Oriented Rock Men 18-34
WTKT-AM(5) Urban Adult Contemporary Adults 35-64
WLKT-FM(5) Contemporary Hit Radio Adults 18-34
DAYTON
WMMX-FM P Hot Adult Contemporary Women 18-34
WTUE-FM P Rock Men 18-34
WLQT-FM P Adult Contemporary Women 25-54
WXEG-FM P Alternative Men 18-34
WBTT-FM P Dance Persons 18-34
WONE-AM P Nostalgia Persons 35-64
BOISE
KIDO-AM News Talk Adults 25-54
KARO-FM Classic Rock Men 25-54
KLTB-FM Oldies Adults 25-54
KCIX-FM P Adult Contemporary Women 25-54
KXLT-FM P Adult Contemporary Women 25-54
SANTA BARBARA
KTYD-FM(5) Rock Adults 18-34
KQSB-AM(5) Talk Adults 35-64
KSBL-FM(5) Adult Contemporary Adults 25-54
KLDZ-FM(6) P -- --
CEDAR RAPIDS
WMT-AM Full Service Adults 35-64
WMT-FM Adult Contemporary Women 25-54
CHEYENNE
KIGN-FM P Adult Contemporary Women 25-54
KLEN-FM P Adult Contemporary Women 25-54
KOLZ-FM P Country Adults 25-54
KGAB-AM P Talk Adults 35-64
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
BROADCAST AREA/ PENDING ACQUISITION TARGET
STATION(1) (P) FORMAT DEMOGRAPHIC
- -------------------- --------------------- ------------------------- -------------
<S> <C> <C> <C>
LIMA
WIMA-AM(5) News Talk Adults 35-64
WIMT-FM(5) Country Adults 25-54
WBUK-FM(5) Oldies Adults 25-54
WCKY-FM(5)(6) -- --
CASPER
KTWO-AM Full Service/Country Adults 35-64
KMGW-FM Adult Contemporary Women 25-54
FORT COLLINS/GREELEY
KCOL-AM(5) News Talk Adults 35-64
KPAW-FM(5) Oldies/Adult Contemporary Adults 25-54
KGLL-FM(5) Country Adults 25-54
SANDUSKY
WLEC-AM(5) Nostalgia Adults 35-64
WCPZ-FM(5) Adult Contemporary Women 25-54
VENICE/ENGLEWOOD
WAMR-AM Talk Adults 25-54
WCTQ-FM Country Adults 25-54
WEDD-FM(6) -- --
</TABLE>
- ------------------------------
(1) Jacor also owns or has the right to purchase two insignificant stations in
Munfordville, Kentucky and one each in Sebring, Florida, Morro Bay,
California and Thousand Oaks, California.
(2) The Company provides programming and sells air time for WGST-FM in Atlanta
and WAQZ-FM, WSAI-AM and WAZU-AM in Cincinnati pursuant to LMAs.
(3) Excludes XTRA-FM and XTRA-AM, stations Jacor provides programming to and
sells air time for under an exclusive sales agency agreement.
(4) Excludes KTCL-FM in Denver and WSJW-FM in Louisville on which Jacor sells
advertising time pursuant to a JSA.
(5) Acquisition completed after April 30, 1997.
(6) WEDD-FM, WCKY-FM and KLDZ-FM are unconstructed stations and, as such, are
not yet operating.
TELEVISION
Jacor owns a television station in the Cincinnati broadcast area where it
currently owns and operates multiple radio stations. By operating a television
station in the broadcast area where Jacor has a significant radio presence,
Jacor has realized significant operating efficiencies including shared news
departments and reduction of administrative overhead. Jacor currently operates
this television station under a temporary waiver of an FCC rule that restricts
ownership of television and radio stations in the same market. This waiver will
continue until at least six months after the FCC completes a pending rulemaking
proceeding in which it is considering whether to substantially liberalize this
rule.
BROADCASTING SERVICES
Jacor currently owns and distributes syndicated talk programming for radio
broadcasting, including such programs as RUSH LIMBAUGH and DR. DEAN EDELL. The
Rush Limbaugh program is a nationally syndicated talk radio program broadcast on
more than 600 radio stations. The DR. DEAN EDELL program is a health care and
medicine talk radio program broadcast on more than 300 radio stations. Upon
Jacor's consummation of the Premiere Merger, the Company will also be the
producer and distributor for an additional 52 syndicated programs and services,
including LEEZA GIBBONS ENTERTAINMENT TONIGHT ON THE RADIO, THE MELROSE PLACE
MINUTE and THE JIM ROME SHOW. Premiere's programming is currently broadcast on
more than 4,000 radio stations pursuant to over 6,300 contracts. See
"Broadcasting Services Acquisitions."
The Premiere Merger provided Jacor with comprehensive radio research
services and a national, in-house sales force. Premiere's Newstrack service
provides comprehensive weekly call-out research services for News/Talk radio
formats, which research services help radio station affiliates increase their
audience
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<PAGE>
share and ratings. The Company will provide the research services in exchange
for commercial broadcast inventory instead of on a cash basis distribution in
order to make the services more attractive to radio stations which have limited
cash resources and/or excess commercial broadcast inventory.
Premiere's national, in-house sales force and infrastructure sells
commercial broadcast inventory to more than 350 advertisers. The Company will
leverage its sales force and generate additional revenues without significant
additional overhead costs by providing network advertising sales representation
services, on a commission basis, to third-party radio networks and independent
programming and service suppliers that do not have their own sales forces. Jacor
believes that Premiere is presently the second largest network radio advertising
sales representative in the United States in terms of its gross billings. It
presently represents nine independent radio networks, including WOR Radio
Networks, One-on-One Sports Radio Network and Accuweather.
In addition, Jacor will benefit from the distribution network acquired with
NSN Network Services, which network will create efficiencies and lower costs
related to the distribution of programming among the Company's radio stations.
Further, this network will enhance the Company's back-office backbone by
facilitating the sharing of financial data and other communications.
ADVERTISING
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio serves primarily as a medium for local advertising. The
growth in total radio advertising revenue tends to be fairly stable and has
generally grown at a rate faster than the Gross National Product ("GNP").
Advertising revenue has risen more rapidly during the past 10 years than either
inflation or the GNP. Total advertising revenue in 1996 of $11.3 billion, as
reported by RAB, was its highest level in the industry's history.
During the year ended December 31, 1996, approximately 80% of Jacor's
broadcast revenue (adjusted to include the effect of Jacor's acquisitions),
would have been generated from the sale of local advertising and approximately
20% from the sale of national advertising. Jacor believes that radio is one of
the most efficient, cost-effective means for advertisers to reach specific
demographic groups. The advertising rates charged by Jacor's radio stations are
based primarily on (i) the station's ability to attract an audience in the
demographic groups targeted by its advertisers (as measured principally by
quarterly Arbitron rating surveys that quantify the number of listeners tuned to
the station at various times), (ii) the number of stations in the market that
compete for the same demographic group, (iii) the supply of and demand for radio
advertising time and (iv) the supply and pricing of alternative advertising
media.
Jacor emphasizes an aggressive local sales effort because local advertising
represents a large majority of Jacor's revenues. Jacor's local advertisers
include automotive, retail, financial institutions and services and health care.
Each station's local sales staff solicits advertising, either directly from the
local advertiser or through an advertising agency for the local advertisers.
Jacor pays a higher commission rate to the sales staff for generating direct
sales because Jacor believes that through a strong relationship directly with
the advertiser, it can better understand the advertiser's business needs and
more effectively design an advertising campaign to help the advertiser sell its
product. Jacor employs personnel in each market to produce commercials for the
advertisers. National advertising sales for most of Jacor's stations are made by
Jacor's national sales managers in conjunction with the efforts of an
independent advertising representative who specializes in national sales and is
compensated on a commission-only basis.
Jacor believes that sports broadcasting, absent unusual circumstances, is a
stable source of advertising revenues. There is less competition for the sports
listener, since only one radio station can offer a particular game. In addition,
due to the higher degree of audience predictability, sports advertisers tend to
sign contracts which are generally longer term and more stable than Jacor's
other advertisers. Jacor's sales staffs are particularly skilled in sales of
sports advertising.
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<PAGE>
According to the Radio Advertising Bureau Radio Marketing Guide and Fact
Book for Advertisers, 1995-1996, each week, radio reaches approximately 76.5% of
all Americans over the age of 12. More than one-half of all radio listening is
done outside the home, in contrast to other advertising mediums, and three out
of four adults are reached by car radio each week. The average listener spends
approximately three hours and 20 minutes per day listening to radio. The highest
portion of radio listenership occurs during the morning, particularly between
the time a listener wakes up and the time the listener reaches work. This
"morning drive time" period reaches more than 85% of people over 12 years of age
and, as a result, radio advertising sold during this period achieves premium
advertising rates.
Jacor believes operating multiple stations in a market gives it significant
opportunities in competing for advertising dollars. Each multiple station
platform better positions Jacor to access a significant share of a given
demographic segment making Jacor stations more attractive to advertisers seeking
to reach that segment of the population.
COMPETITION; CHANGES IN THE BROADCASTING INDUSTRY
The radio broadcasting industry is a highly competitive business. The
success of each of the Company's stations will depend significantly upon its
audience ratings and its share of the overall advertising revenue within its
market. The Company's stations will compete for listeners and advertising
revenue directly with other radio stations as well as many other advertising
media within their respective markets. Radio stations compete for listeners
primarily on the basis of program content and by hiring high-profile talent that
appeals to a particular demographic group. By building in each of its markets a
strong listener base comprised of a specific demographic group, the Company will
be able to attract advertisers seeking to reach those listeners.
In addition to management experience, factors which are material to
competitive position include the station's rank among radio stations in its
market, transmitter power, assigned frequency, audience characteristics, local
program acceptance and the number and characteristics of other stations in the
market area, and other advertising media in that market. Jacor attempts to
improve its competitive position with promotional campaigns aimed at the
demographic groups targeted by its stations and by sales efforts designed to
attract advertisers. Recent changes in the FCC's policies and rules permit
increased joint ownership and joint operation of local radio stations. Those
stations taking advantage of these joint arrangements may in certain
circumstances have lower operational costs and may be able to offer advertisers
more attractive rates and services.
The Company's audience ratings and competitive position will be subject to
change, and any adverse change in a particular market could have a material
adverse effect on the revenue of the Company's stations in that market. Although
Jacor believes that each of its stations will be able to compete effectively in
the market, there can be no assurance that any one of its stations will be able
to maintain or increase its current audience ratings and advertising revenue.
Although the radio broadcasting industry is highly competitive, some legal
restrictions on entry exist. The operation of a radio broadcast station requires
a license from the FCC and the number of radio stations that can operate in a
given market is limited by the availability of the FM and AM radio frequencies
that the FCC will license in that market.
The Company's stations also compete directly for advertising revenues with
other media, including broadcast television, cable television, newspapers,
magazines, direct mail, coupons and billboard advertising. In addition, the
radio broadcasting industry is subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems and the Internet and by digital
audio broadcasting. The radio broadcasting industry historically has grown
despite the introduction of new technologies for the delivery of entertainment
and information, such as television broadcasting, cable television, audio tapes
and compact disks. Greater population and greater availability of radios,
particularly car and portable radios, have contributed to this growth. There can
be no
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assurance, however, that the development or introduction in the future of any
new media technology will not have an adverse effect on the radio broadcasting
industry. Jacor also competes with other radio station groups to purchase
additional stations.
The FCC has allocated spectrum for a new technology, satellite digital audio
radio services ("DARS"), to deliver audio programming. The FCC has proposed, but
not yet adopted licensing and operating rules for DARS, so that the allocated
spectrum is not yet available for service. Jacor cannot predict when and in what
form such rules will be adopted. The FCC granted a waiver in September 1995 to
permit one potential DARS operator to commence construction of a DARS satellite
system, with the express notice that the FCC might not license such operator to
provide DARS, nor would such waiver prejudge the ongoing rule making proceeding.
DARS may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and/or national audiences.
Digital technology also may be used in the future by terrestrial radio broadcast
stations either on existing or alternate broadcasting frequencies, and the FCC
has stated that it will consider making changes to its rules to permit AM and FM
radio stations to offer digital sound following industry analysis of technical
standards. In addition, the FCC has authorized an additional 100 kHz of band
width for the AM band and will soon allocate frequencies in this new band to
certain existing AM station licensees that applied for migration prior to the
FCC's cut-off date. At the end of a transition period, those licensees will be
required to return to the FCC either the license for their existing AM band
station or the license for the expanded AM band station. None of the stations to
be affiliated with the Company have sought authorizations for operations on the
expanded AM band, because such signals operate at a lower power and have less
coverage and thereby are not consistent with Jacor's strategic objectives.
Television stations compete for audiences and advertising revenues with
radio and other television stations and multichannel video delivery systems in
their market areas and with other advertising media such as newspapers,
magazines, outdoor advertising and direct mail. Competition for sales of
television advertising time is based primarily on the anticipated and actually
delivered size and demographic characteristics of audiences as determined by
various services, price, the time of day when the advertising is to be
broadcast, competition from other television stations, including affiliates of
other television broadcast networks, cable television systems and other media
and general economic conditions. Competition for audiences is based primarily on
the selection of programming, the acceptance of which is dependent on the
reaction of the viewing public, which is often difficult to predict. Additional
elements that are material to the competitive position of television stations
include management experience, authorized power and assigned frequency. The
broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of Federal
regulatory bodies, including the FCC, any of which could possibly have a
material effect on a television station's operations and profits. There are
sources of video service other than conventional television stations, the most
common being cable television, which can increase competition for a broadcasting
television station by bringing into its market distant broadcasting signals not
otherwise available to the station's audience, serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel multipoint distribution services ("MMDS"). Moreover, technology
advances and regulatory changes affecting programming delivery through fiber
optic telephone lines and video compression could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming. The Telecom Act permits telephone companies to provide video
distribution services via radio communication, on a common carrier basis, as
"cable systems" or as "open video systems," each pursuant to different
regulatory schemes. Jacor is unable to predict the effect that technological and
regulatory changes will have on the broadcast television industry and on the
future profitability and value of a particular broadcast television station.
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Recent acquisitions of, or investments in, cable multiple-system operators
("MSOs") by large exchange carriers ("LECs") by Regional Bell Operating
Companies ("RBOCs") in the United States, market tests by both LECs and cable
MSOs in various states, and major infrastructure upgrades announced by both LECs
and cable MSOs, presage major expansion of wired communications networks and
consequently their capacities to deliver video programming. The Telecom Act
repealed the "telephone company/cable television cross-ownership prohibition,"
thereby enabling LECs, including the RBOCs, to provide cable television service
in their telephone service areas. LECs may not, however, acquire more than a 10
percent ownership interest in, or enter into joint ventures with, cable systems
in their telephone service areas. The Telecom Act also gives LECs the option to
provide video programming services over an "open video system," or OVS, in which
programming on no more than one-third of the system's channels may be selected
by the LEC or its affiliates. The OVS model may be attractive to LECs because it
is not subject to many of the regulatory requirements applicable to traditional
cable systems, such as the requirement to obtain a local cable television
franchise. In addition, a number of LECs have announced their intention to
provide video programming services over MMDS "wireless cable" systems.
In addition, the FCC authorizes DBS services throughout the United States.
Currently, two FCC permittees, DirecTv and United States Satellite Broadcasting,
provide subscription DBS services via high power communications satellites and
small dish receivers, and other companies provide direct-to-home video service
using lower powered satellites and larger receivers. Additional companies are
expected to commence direct-to-home operations in the near future. DBS and MMDS,
as well as other new technologies, will further increase competition in the
delivery of video programming.
Jacor cannot predict what other matters might be considered in the future,
nor can it judge in advance what impact, if any, the implementation of any of
these proposals or changes might have on its business.
FEDERAL REGULATION OF BROADCASTING
The ownership, operation and sale of stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and power of
stations; issues, renews, revokes and modifies station licenses; determines
whether to approve changes in ownership or control of station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act. On February 8, 1996, the
President signed the Telecom Act. The Telecom Act, among other measures, directs
the FCC to (a) eliminate the national radio ownership limits; (b) increase the
local radio ownership limits as specified in the Telecom Act; (c) issue
broadcast licenses for periods of eight years; (d) eliminate the opportunity for
the filing of competing applications against broadcast renewal applications; and
(e) modify the rules governing in-market radio-television ownership. Certain of
these measures have been adopted by the FCC. Other provisions of the Telecom Act
will be acted upon by the FCC through rule-making proceedings.
Radio stations in the United States operate either by Amplitude Modulation
(AM), conducted on 107 different frequencies located between 540 and 1600
kilohertz (kHz) (plus 10 frequencies between 1610-1710 kHz on the newly expanded
AM band) in the low frequency band of the electromagnetic spectrum, or by
Frequency Modulation (FM), conducted on approximately 100 different frequencies
located between 88 and 108 megahertz (MHZ) at the very high frequency band of
the electromagnetic spectrum.
Television stations in the United States operate as either Very High
Frequency (VHF) stations (channels 2 through 13) or Ultra High Frequency (UHF)
stations (channels 14 through 69). UHF stations in many cases have a weaker
signal and therefore do not achieve the same coverage as VHF stations.
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LICENSE GRANTS AND RENEWALS. The Communications Act provides that a
broadcast station license may be granted to an applicant if the grant would
serve the public interest, convenience and necessity, subject to certain
limitations referred to below. In making licensing determinations, the FCC
considers the legal, technical, financial and other qualifications of the
applicant, including compliance with the Communications Act's limitations on
alien ownership, compliance with various rules limiting common ownership of
broadcast, cable and newspaper properties, and the "character" of the licensee
and those persons holding "attributable" interests in the licensee. Broadcast
station licenses are granted for specific periods of time and, upon application,
are renewable for additional terms. The Telecom Act amends the Communications
Act to provide that broadcast station licenses be granted, and thereafter
renewed, for a term not to exceed eight years, if the FCC finds that the public
interest, convenience, and necessity would be served.
Generally, the FCC renews licenses without a hearing. The Telecom Act amends
the Communications Act to require the FCC to grant an application for renewal of
a broadcast station license if: (1) the station has served the public interest,
convenience and necessity; (2) there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC; and
(3) there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC which, taken together, would
constitute a pattern of abuse. Pursuant to the Telecom Act, competing
applications against broadcast renewal applications will no longer be
entertained. The Telecom Act provides that if the FCC, after notice and an
opportunity for a hearing, decides that the requirements for renewal have not
been met and that no mitigating factors warrant lesser sanctions, it may deny a
renewal application. Only thereafter may the FCC accept applications by third
parties to operate on the frequency of the former licensee. The Communications
Act continues to authorize the filing of petitions to deny against license
renewal applications during particular periods of time following the filing of
renewal applications. Petitions to deny can be used by interested parties,
including members of the public, to raise issues concerning the qualifications
of the renewal applicant.
License renewals (expiring in 2004 and 2005) were granted in 1996 and 1997
for Jacor's Florida, Georgia, Iowa, Kentucky, South Carolina, Indiana, St. Louis
and certain of its Colorado and Ohio radio stations. Presently pending are
renewal applications for certain Jacor radio stations in Idaho, Wyoming,
Colorado, Nevada and Utah and for Jacor's television station, WKRC-TV, in
Cincinnati, Ohio. Two Columbus, Ohio radio stations are subject to a petition
challenging the renewal of their licenses and those of certain other
broadcasters for alleged failure to comply with equal employment opportunity
policies. Jacor has responded to that petition and anticipates obtaining license
renewals for full terms for these Ohio stations. The FCC granted its initial
consent to the renewal for full terms for four Cincinatti, Ohio radion stations
that had been the subject of a similar petition requiring the stations to
provide yearly reports for the next three years on their EEO efforts and
results. That consent is the subject of a petition for reconsideration by the
National Rainbow Coalition, which had initially petitioned against the renewals.
Renewal applications will be filed in 1997 for the remainder of Jacor's station
licenses that are currently due to expire in 1997. Jacor does not anticipate any
material difficulty in obtaining license renewals for full terms in the future.
When the FCC considers a proposed transfer of control of an FCC licensee
that holds multiple FCC licenses, some of which licenses are subject to pending
renewal applications, the FCC's past policy has been either to defer action on
the transfer application until the pending renewals have been granted or to
grant the transfer application conditioned on the transfer not being consummated
until the renewals have been granted. The FCC has recently modified that policy
to provide that so long as there are no unresolved issues pertaining to the
qualifications of the transferor or the transferee and so long as the transferee
is willing to substitute itself as the renewal applicant, the FCC will grant a
transfer application for a licensee holding multiple licenses and permit
consummation of the transfer notwithstanding the pendency of renewal
applications for one or several of the licensee's stations. The FCC still
continues to apply its policy to defer action or condition its consent on the
renewal grant for transactions in which all, or a majority, of the stations to
be transferred have pending renewal applications.
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LICENSE ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act
prohibits the assignment of a license or the transfer of control of a
corporation holding such a license without the prior approval of the FCC.
Applications to the FCC for such assignments or transfers are subject to
petitions to deny by interested parties and must satisfy requirements similar to
those for renewal and new station applicants.
OWNERSHIP RULES. Rules of the FCC limit the number and location of
broadcast stations in which one licensee (or any party with a control position
or attributable ownership interest therein) may have an attributable interest.
The FCC, pursuant to the Telecom Act, eliminated the "national radio ownership
rule." Consequently, there now is no limit imposed by the FCC to the number of
radio stations one party may own nationally.
The "local radio ownership rule" limits the number of stations in a radio
market in which any one individual or entity may have a control position or
attributable ownership interest. Pursuant to the Telecom Act, the FCC revised
its rules to increase the local radio ownership limits as follows: (a) in
markets with 45 or more commercial radio stations, a party may own up to eight
commercial radio stations, no more than five of which are in the same service
(AM or FM); (b) in markets with 30-44 commercial radio stations, a party may own
up to seven commercial radio stations, no more than four of which are in the
same service; (c) in markets with 15-29 commercial radio stations, a party may
own up to six commercial radio stations, no more than four of which are in the
same service; and (d) in markets with 14 or fewer commercial radio stations, a
party may own up to five commercial radio stations, no more than three of which
are in the same service, provided that no party may own more than 50% of the
commercial stations in the market. In addition, the FCC has a "cross interest"
policy that may prohibit a party with an attributable interest in one station in
a market from also holding either a "meaningful" non-attributable equity
interest (e.g., non-voting stock, voting stock, limited partnership interests)
or key management position in another station in the same market, or which may
prohibit local stations from combining to build or acquire another local
station. The FCC is presently evaluating its cross-interest policy as well as
policies governing attributable ownership interests. Jacor cannot predict
whether the FCC will adopt any changes in these policies or, if so, what the new
policies will be.
Under the current rules, an individual or other entity owning or having
voting control of 5% or more of a corporation's voting stock is considered to
have an attributable interest in the corporation and its stations, except that
banks holding such stock in their trust accounts, investment companies, and
certain other passive interests are not considered to have an attributable
interest unless they own or have voting control over 10% or more of such stock.
The FCC is currently evaluating whether to raise the foregoing benchmarks to 10%
and 20%, respectively. An officer or director of a corporation or any general
partner of a partnership also is deemed to hold an attributable interest in the
media license. Jacor cannot predict whether the FCC will adopt these or any
other proposals.
Under current FCC rules, shareholders of the Company with 5% or more of the
outstanding votes (except for qualified institutional investors, for which the
10% benchmark is applicable), if any, are considered to hold attributable
interests in the Company. Such holders of attributable interests must comply
with or obtain waivers of the FCC's multiple and cross ownership limits. Jacor
is not aware of any 5% or more shareholder who holds interests that would cause
Jacor to exceed the FCC limits on media ownership. If such interests would
arise, Jacor has the corporate power to redeem stock of its shareholder to the
extent necessary to be in compliance with FCC and Communications Act
requirements, including limits on media ownership by attributable parties and
alien ownership.
The rules also generally prohibit the acquisition of an ownership or control
position in a television station and one or more radio stations serving the same
market (termed the "one-to-a-market" rule). Current FCC policy looks favorably
upon waiver requests relating to television and AM/FM radio combinations in the
top 25 television markets where at least 30 separately owned broadcast stations
will remain after the combination. One-to-a-market waiver requests in other
markets, as well as those in the top 25 television markets that involve the
combination of a television station and more than one same
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service (AM or FM) radio station, presently are evaluated by the FCC pursuant to
a fact-based, five-part, case-by-case review. The FCC also has an established
policy for granting waivers that involve "failed" stations. The FCC currently is
considering changes to its one-to-a-market waiver standards in a pending
rule-making proceeding. The FCC also plans to review and possibly modify its
current prohibitions relating to ownership or control positions in a daily
newspaper and a broadcast station in the same market. In conjunction with
Jacor's acquisition of the Citicasters stations, the FCC granted Jacor's request
for waivers of the one-to-a-market rule to permit common ownership of radio
stations and a television station in each of Cincinnati and Tampa-St.
Petersburg, subject to the outcome in the pending rule-making proceeding. The
FCC waiver directed that should divestiture be required as a result of that
rule-making proceeding, Jacor will be required to file an application for FCC
consent to sell the necessary stations within six months from the release of the
FCC order in the rule-making proceeding. The Company disposed of WTSP-TV, St.
Petersburg in December 1996. The sale of that station rendered moot the
one-to-a-market waiver granted Jacor for radio and television ownership in
Tampa-St. Petersburg. There can be no assurance that the FCC will adopt a
revised one-to-a-market policy in its rule-making proceeding that would permit
the Company to continue to own WKRC-TV, Cincinnati, along with all of its
current Cincinnati-area radio stations. If divestitures are required, there can
be no assurance that Jacor would be able to obtain full value for such stations
or that such sales would not have a material adverse impact upon Jacor's
business, financial condition or results of operations. In such event, Jacor's
intention would be to seek reconsideration and/or appellate court review of the
FCC's decision.
Holders of non-voting stock generally will not be attributed an interest in
the issuing entity, and holders of debt and instruments such as warrants,
convertible debentures, options, or other non-voting interests with rights of
conversion to voting interests generally will not be attributed such an interest
unless and until such conversion is effected. The FCC is currently considering
whether it should attribute non-voting stock, or perhaps non-voting stock
interests when combined with other rights, such as voting shares or contractual
relationships, along with its review of its other attribution policies. Jacor
cannot predict whether the FCC will adopt these or other changes in its
attribution policies.
Under the Communications Act, broadcast licenses may not be granted,
transferred or assigned to any corporation of which more than one-fifth of the
capital stock is owned of record or voted by non-U.S. citizens or foreign
governments or their representatives (collectively, "Aliens"). In addition, the
Communications Act provides that no broadcast license may be held by any
corporation of which more than one-fourth of the capital stock is owned of
record or voted by Aliens, without an FCC public interest finding. The FCC has
issued interpretations of existing law under which these restrictions in
modified form apply to other forms of business organizations, including general
and limited partnerships. The FCC also prohibits a licensee from continuing to
control broadcast licenses if the licensee otherwise falls under Alien influence
or control in a manner determined by the FCC to be in violation of the
Communications Act or contrary to the public interest. No officers, directors or
significant shareholders of Jacor are known by Jacor to be Aliens.
REGULATION OF BROADCAST OPERATIONS. In order to retain licenses,
broadcasters are obligated, under the Communications Act, to serve the "public
interest." Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized regulatory procedures and requirements developed to
promote the broadcast of certain types of programming responsive to the
problems, needs, and interests of a station's community of license.
The regulatory changes have provided broadcast stations with increased
flexibility to design their program formats and have provided relief from some
record keeping and FCC filing requirements. However, licensees continue to be
required to present programming that is responsive to significant community
issues and to maintain certain records demonstrating such responsiveness.
Complaints from listeners concerning a station's programming have been
considered by the FCC when evaluating licensee renewal applications and at other
times.
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Stations still are required to follow various rules promulgated under the
Communications Act that regulate political broadcasts, political advertisements,
sponsorship identifications, technical operations and other matters. "Equal
Opportunity" and affirmative action requirements also exist. Failure to observe
these or other rules can result in the imposition of monetary forfeitures or in
the grant of a "short" (less than full term) license term or license revocation.
The Telecom Act states that the FCC may deny, after a hearing, the renewal of a
broadcast license for serious violations of the Communications Act or the FCC's
rules or where there have been other violations which together constitute a
pattern of abuse.
The FCC has adopted rules regarding human exposure to levels of radio
frequency ("RF") radiation. These rules require applicants for new broadcast
stations, renewals of broadcast licenses or modification of existing licenses to
inform the FCC at the time of filing such applications whether a new or existing
broadcast facility would expose people to RF radiation in excess of certain
guidelines.
AGREEMENTS WITH OTHER BROADCASTERS. Over the past several years a
significant number of broadcast licensees, including certain of Jacor's
subsidiaries, have entered into cooperative agreements with other stations in
their market. These agreements may take varying forms, subject to compliance
with the requirements of the FCC's rules and policies and other laws. One
typical example is a TBA or LMA between two separately owned stations serving a
common service area, whereby the licensee of one station programs substantial
portions of the broadcast day on the other licensee's station, subject to
ultimate editorial and other controls being exercised by the latter licensee,
and sells advertising time during such program segments for its own account.
Another is a JSA pursuant to which a licensee sells advertising time on both its
own station or stations and on another separately owned station.
The FCC has held that LMAs do not per se constitute a transfer of control
and are not contrary to the Communications Act provided that the licensee of the
station maintains complete responsibility for and control over operations of its
broadcast station (including, specifically, control over station finances,
personnel and programming) and complies with applicable FCC rules and with
antitrust laws. At present, the FCC is considering whether it should treat as
attributable multiple business arrangements among local stations, such as joint
sales accompanied by debt financing. Jacor cannot predict whether the FCC would
require the termination or restructuring of Jacor's JSAs or other arrangements
in the future.
Under certain circumstances, the FCC will consider a radio station brokering
time on another radio station serving the same market to have an attributable
ownership interest in the brokered station for purposes of the FCC's radio
multiple ownership rules. In particular, a radio station is not permitted to
enter into a LMA giving it the right to program more than 15% of the broadcast
time, on a weekly basis, of another local radio station which it could not own
under the FCC's local radio ownership rules.
The FCC's rules also prohibit a radio licensee from simulcasting more than
25% of its programming on another radio station in the same broadcast service
(i.e., AM-AM or FM-FM) whether it owns both stations or operates both through a
LMA where both stations serve substantially the same geographic area.
LEGISLATION AND REGULATION OF TELEVISION OPERATIONS. Television stations
are regulated by the FCC pursuant to provisions of the Communications Act and
the FCC rules that are in many instances the same or similar to those applicable
to radio stations. Besides technical differences between television and radio,
principal variances in regulation relate to limits on national and local
ownership, LMAs and simulcasts, children's programming requirements, advanced
television service, signal carriage rights on cable systems, license terms,
"V-chip" technology and network/affiliate relations.
The current FCC rules prohibit combined local ownership or control of
television stations with overlapping "Grade B" service contours (unless
established waiver standards are met). An FCC rule-making proceeding is in
process to determine whether to retain, modify or eliminate these local
television ownership rules. The current FCC rules permit an entity to have an
attributable interest in an unlimited number of television stations so long as
such stations do not reach in the aggregate more than 35% of the national
television audience. Additionally, the rules prohibit (with certain
qualifications) the holder of an
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attributable interest in a television station from also having an attributable
interest in a radio station, daily newspaper or cable television system serving
a community located within the relevant coverage area of that television
station. As noted above, the radio/television one-to-a-market rule is under
review and the FCC also plans to review and possibly modify its current
broadcast/daily newspaper restriction. Pursuant to the Telecom Act, the FCC
eliminated the restriction of network ownership of cable systems. The FCC will
monitor the response to this change to determine if additional rule changes are
necessary to ensure nondiscriminatory carriage and channel positioning of
nonaffiliated broadcast stations by network-owned cable systems.
Presently, LMAs between television stations are not treated as attributable
interests and there is no restriction on same-market television simulcasts. The
FCC is considering in a pending rule-making proceeding whether to treat
television LMAs similar to radio LMAs for multiple ownership rule purposes.
Jacor's television station is not a participant in any LMAs.
On August 8, 1996, the FCC amended its rules implementing the Children's
Television Act of 1990 (the "CTA") to establish for broadcast television renewal
applications filed after August 31, 1997, a "processing guideline" of at least
three hours per week of educational and informational programming for children.
A television station will receive FCC staff-level approval of the portion of its
license renewal application pertaining to the CTA if it satisfied the processing
guideline by broadcasting at least three weekly hours of "Core Programming,"
which is defined as education and informational programming that, among other
things, (a) has serving the educational and informational needs of children "as
a significant purpose," (b) has a specified educational and informational
objective and a specified target child audience, (c) is regularly scheduled,
weekly programming, (d) is at least 30 minute in length, and (e) airs between
7:00 a.m. and 10:00 p.m. Alternatively, a station may qualify for staff-level
approval even if it broadcasts "somewhat less" than three hours per week of Core
Programing by demonstrating that it has aired a weekly package of different
types of educational and informational programming that it "at least equivalent"
to three hours of Core Programming. A licensee that does not meet the processing
guideline under either of these alternatives will be referred by the FCC's staff
to the Commissioners of the FCC, who will evaluate the licensee's compliance
with CTA on the basis of both its programming and its other efforts related to
children's educational and informational programming. A television station
ultimately found not to have complied with the CTA could face sanctions
including monetary fines and the possible non-renewal of its broadcast license.
The FCC is conducting a rule-making proceeding to devise a table of channel
allotments in connection with the introduction of "advanced" or "high
definition" television service ("DTV"). The FCC has preliminarily decided to
allot a second broadcast channel to each full-power commercial television
station for DTV operation. According to this preliminary decision, stations
would be permitted to phase in their DTV operations over a period of several
years following adoption of a final table of allotments, after which they would
be required to surrender their non-DTV channel. The FCC has proposed allotting
all full-service television stations a second broadcast channel for digital
operation that substantially replicates the service areas of their existing
stations. Under this proposal, most stations, including Jacor's station, would
receive a digital channel assignment in the "core spectrum" between channels 7
and 51. This proposal is open for public comment. During the past year, Congress
has considered proposals that would require incumbent broadcasters to bid at
auctions for the additional spectrum required to effect a transition to DTV, or
alternatively, would assign additional DTV spectrum to incumbent broadcasters
and require the early surrender of their non-DTV channel for sale by public
auction. It is not possible to predict if, or when, any of these proposals will
be adopted or the effect, if any, adoption of such proposals would have on
Jacor's television station.
FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") require each television
broadcaster to elect, at three-year intervals beginning June 17, 1993, either to
(a) require carriage of its signal by cable systems in the station's market
("must-carry") or (b) negotiate the terms on which such broadcast station would
permit transmission of its signal
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by the cable systems within its market ("retransmission consent"). In a 2-1
decision issued on December 13, 1995, a special three-judge panel of the U.S.
District Court for the District of Columbia upheld the constitutionality of the
must-carry provisions. The District Court's decision has been appealed to the
U.S. Supreme Court, which will hear the appeal during its 1996-1997 term, with a
decision expected in the second calendar quarter of 1997. In the meantime, the
FCC's must-carry regulations implementing the Cable Act remain in effect. Jacor
cannot predict the outcome of the Supreme Court review of the case.
Until the passage of the Telecom Act, television licenses were granted and
renewed for a maximum of five years. The Telecom Act amends the Communications
Act to provide that broadcast station licenses be granted, and thereafter
renewed, for a term not to exceed eight years, if the FCC finds that the public
interest, convenience, and necessity would be served. The FCC has not yet
implemented the change in license terms provided in the Telecom Act. The Telecom
Act also requires the broadcast and cable industries to develop and transmit an
encrypted rating that would permit the blocking of violent or indecent video
programming and allow telephone companies to operate cable television systems in
their own service areas.
Jacor's Cincinnati television station is a CBS-network affiliate and a VHF
station. The FCC currently is reviewing certain of its rules governing the
relationship between broadcast television networks and their affiliated
stations. The FCC is conducting a rule-making proceeding to examine its rules
prohibiting broadcast television networks from representing their affiliated
stations for the sale of non-network advertising time and from influencing or
controlling the rates set by their affiliates for the sale of such time.
Separately, the FCC is conducting a rule-making proceeding to consider the
relaxation or elimination of its rules prohibiting broadcast networks from (a)
restricting their affiliates' right to reject network programming; (b) reserving
an option to use specified amounts of their affiliates' broadcast time; and (c)
forbidding their affiliates from broadcasting the programming of another
network; and to consider the relaxation of its rule prohibiting
network-affiliated stations from preventing other stations from broadcasting the
programming of their network.
PROPOSED CHANGES. The FCC has not yet implemented formally certain of the
changes to its rules necessitated by the Telecom Act. Moreover, the Congress and
the FCC have under consideration, and may in the future consider and adopt, new
laws, regulations and policies regarding a wide variety of matters that could,
directly or indirectly, (i) affect the operation, ownership and profitability of
Jacor and its broadcast stations, (ii) result in the loss of audience share and
advertising revenues of Jacor's radio broadcast stations, (iii) affect the
ability of Jacor to acquire additional broadcast stations or finance such
acquisitions, (iv) affect current cooperative agreements and/or financing
arrangements with other radio broadcast licensees, or (v) affect Jacor's
competitive position in relationship to other advertising media in its markets.
Such matters include, for example, changes to the license authorization and
renewal process; proposals to revise the FCC's equal employment opportunity
rules and other matters relating to minority and female involvement in
broadcasting; proposals to alter the benchmarks or thresholds for attributing
ownership interest in broadcast media; proposals to change rules or policies
relating to political broadcasting; changes to technical and frequency
allocation matters, including those relative to the implementation of digital
audio broadcasting on both a satellite and terrestrial basis; proposals to
restrict or prohibit the advertising of beer, wine and other alcoholic beverages
on radio; changes in the FCC's cross-interest, multiple ownership, alien
ownership and cross-ownership policies; proposals to allow greater telephone
company participation in the delivery of audio and video programming; proposals
to limit the tax deductibility of advertising expenses by advertisers; potential
auctions for DTV or non-DTV television spectrum; the implementation of "V-chip"
technology; and changes to children's television programming requirements,
signal carriage rights on cable systems and network affiliate relations.
Although Jacor believes the foregoing discussion is sufficient to provide
the reader with a general understanding of all material aspects of FCC
regulations that affect Jacor, it does not purport to be a complete summary of
all provisions of the Communications Act or FCC rules and policies. Reference is
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<PAGE>
made to the Communications Act, FCC rules and the public notices and rulings of
the FCC for further information.
ANTITRUST CONSIDERATIONS. Certain acquisitions by Jacor of broadcasting
companies, radio station groups or individual radio stations will be subject to
review by the Antitrust Division and the FTC pursuant to the provisions of the
HSR Act. Generally, acquisitions involving assets valued at $15.0 million or
more, and certain acquisitions of voting securities, come within the purview of
the HSR Act. Although it is likely that many proposed acquisitions will not
require the parties to the transaction to comply with the HSR Act, or if such
compliance is required, will result in rapid clearance by the antitrust
agencies, in certain instances, the antitrust agencies may choose to investigate
the proposed acquisition, particularly if it appears that such acquisition will
result in substantial concentration within a specific market. Any decision by an
antitrust agency to challenge a proposed acquisition could affect the ability of
Jacor to consummate the proposed acquisition, or to consummate the acquisition
on the proposed terms.
The Antitrust Division and the FTC determine between themselves which agency
is to take a closer look at a proposed transaction. The Antitrust Division or
the FTC, as the case may be, may then issue a formal request for additional
information ("the Second Request"). Under the HSR Act, if a Second Request is
issued, the waiting period then would be extended and would expire at 11:59
p.m., on the twentieth calendar day after the date of substantial compliance by
both parties with such Second Request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of the parties. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue.
ENERGY AND ENVIRONMENTAL MATTERS
Jacor's source of energy used in its broadcasting operations is electricity.
No limitations have been placed on the availability of electrical power, and
management believes its energy sources are adequate. Management believes that
Jacor is currently in material compliance with all statutory and administrative
requirements as related to environmental quality and pollution control.
EMPLOYEES
As of December 31, 1996, Jacor employed approximately 3,500 persons, 2,500
on a full-time and 1,000 on a part-time basis. Each Jacor station has its own
complement of employees which generally include a general manager, sales
manager, operations manager, business manager, advertising sales staff, on-air
personalities and clerical personnel.
PROPERTIES/FACILITIES
Jacor leases approximately 16,244 square feet for its corporate offices in
Covington, Kentucky under a lease expiring in 2008 with a five-year renewal
option. Jacor also owns and leases space for the office and studio facilities at
its radio station locations throughout the United States. The same is true for
Jacor's tower sites and antennae.
Expansion of Jacor's operations generally comes from the acquisition of
stations and their facilities and ordinarily does not create a need for
additional space at existing locations, although the emergence of LMAs and JSAs
with other stations in Jacor's existing markets could create such a need. Any
future need for additional office and studio space at existing locations will be
satisfied by the construction of additions to the Jacor-owned facilities and, in
the case of leased facilities, the lease of additional space or the relocation
of the office and studio. Jacor's office and studio facilities are all located
in downtown or
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suburban office buildings and are capable of being relocated to any suitable
office facility in the station market area. Similarly, although many of Jacor's
tower sites are strategically located, all are capable of being relocated to
suitable sites in their particular station market areas.
Jacor owns substantially all of its equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment. The towers, antennae and other transmission equipment used by Jacor's
stations are in generally good condition. In management's opinion, the quality
of the signals range from good to excellent, and Jacor is committed to
maintaining and updating its equipment and transmission facilities in order to
achieve the best possible signal in the market area.
Although Jacor believes its properties are generally adequate for its
operations, opportunities to upgrade facilities are continuously reviewed.
See Notes 7 and 11 of Notes to Jacor's Consolidated Financial Statements
included elsewhere herein for a description of encumbrances against Jacor's
properties and Jacor's rental obligations.
LITIGATION
From time to time, Jacor becomes involved in various claims and lawsuits
that are incidental to its business. In the opinion of Jacor's management, there
are no material legal proceedings pending against Jacor.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF JACOR
The following table sets forth, as of June 12, 1997, the number of shares
and percentage of Jacor Common Stock beneficially owned by each person who is
known to Jacor to be the beneficial owner of more than 5% of Jacor Common Stock,
by each of Jacor's directors and nominees for election as directors, by Jacor's
named executive officers, and by all of Jacor's executive officers and directors
as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS(2)
- ---------------------------------------- --------------------- --------
<S> <C> <C>
5% or More Beneficial Owners
Zell/Chilmark Fund L.P.................. 13,349,720(3) 29.9%
David M. Schulte........................ 13,349,720(4) 29.9%
FMR Corp. and related reporting
persons............................... 3,052,943(5) 6.8%
Massachusetts Financial Services
Company............................... 2,759,849(6) 6.2%
American Financial Group, Inc. and
related reporting persons............. 2,182,589(7) 4.7%
Marsh and McLennan Companies, Inc. and
related reporting persons............. 2,164,673(8) 4.8%
Directors and Executive Officers
John W. Alexander....................... 40,000(9) *
Peter C.B. Bynoe........................ 0 *
Rod F. Dammeyer......................... 13,349,720(4)(10) 29.9%
F. Philip Handy......................... 60,100(11) *
Marc Lasry.............................. 27,000(9) *
Robert L. Lawrence...................... 533,255(12) 1.2%
Randy Michaels.......................... 691,857(13)(14) 1.5%
Sheli Z. Rosenberg...................... 13,858,363(4)(15) 31.0%
Maggie Wilderotter...................... 200 *
Samuel Zell............................. 13,852,813(3)(4)(16) 31.0%
Jon M. Berry............................ 237,437(14)(17) *
Thomas P. Owens......................... 48,455(18) *
R. Christopher Weber.................... 471,836(14)(19) 1.1%
All executive officers and directors as
a group (21 persons).................. 16,116,956(20) 36.1%
</TABLE>
- ------------------------
*Less than 1%
(1) The Commission has defined beneficial ownership to include sole or shared
voting or investment power with respect to a security or the right to
acquire beneficial ownership of a security within 60 days. The number of
shares indicated are owned with sole voting and investment power unless
otherwise noted and includes certain shares held in the name of family
members, trusts and affiliated companies as to which beneficial ownership
may be disclaimed. The number of shares indicated includes shares of Jacor
Common Stock issuable pursuant to options granted under Jacor's 1993 Stock
Option Plan and which have vested.
(2) Under rules promulgated by the Commission, any securities not outstanding
that are subject to options or warrants exercisable within 60 days are
deemed to be outstanding for the purpose of computing the percentage of the
class owned by such person but are not deemed to be outstanding for the
purpose of computing the percentage of the class owned by any other person.
(3) The address of Zell/Chilmark Fund L.P. ("Zell/Chilmark") is Two North
Riverside Plaza, Suite 600, Chicago, Illinois 60606. Zell/Chilmark is a
Delaware limited partnership controlled by Samuel Zell and David M. Schulte,
former directors of the Company, as follows: the sole general partner of
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Zell/Chilmark is ZC Limited Partnership ("ZC Limited"); the sole general
partner of ZC Limited is ZC Partnership; the sole general partners of ZC
Partnership are ZC, Inc. and CZ, Inc.; Mr. Zell is the sole stockholder of
ZC, Inc.; and Mr. Schulte is the sole Stockholder of CZ, Inc.
(4) All shares beneficially owned by Zell/Chilmark (See Note (3) above) are
included in the shares beneficially owned by Messrs. Zell, Schulte and
Dammeyer and Mrs. Rosenberg, who constitute all of the members of the
management committee of ZC Limited. The address of Mr. Schulte is 875 N.
Michigan Avenue, Suite 2200, Chicago, Illinois 60611. The address of Mr.
Zell is Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606. Mr.
Schulte indirectly shares beneficial ownership of a 20% limited partnership
interest in ZC Limited, and Mr. Zell indirectly shares beneficial ownership
of an 80% limited partnership interest in ZC Limited.
(5) On February 14, 1997, FMR Corp. ("FMR"), Fidelity Management and Research
Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., and the
affiliates of FMR Corp. set forth below, as a group, filed with the
Commission a Schedule 13G reporting beneficial ownership of Jacor Common
Stock as of December 31, 1996. FMR reported beneficial ownership of
3,052,943 shares of Jacor Common Stock. Fidelity reported beneficial
ownership of 2,942,185 shares of Jacor Common Stock as a result of acting as
an investment advisor to various investment companies. This number of shares
includes 249,785 shares of Jacor Common Stock resulting from the assumed
conversion of $18,624,000 principal amount of Liquid Yield Option Notes
("LYONs") (13.412 shares of Jacor Common Stock for each $1,000 principal
amount of LYONs). Edward C. Johnson 3d, Chairman of FMR Corp., and FMR
Corp., through their control of Fidelity, each reported having the sole
power to dispose of the 2,942,185 shares owned by the various investment
funds ("Fidelity Funds'). Neither FMR Corp., nor Mr. Johnson, reported the
sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power reportedly resides in the Fidelity Funds' Boards
of Trustees. Fidelity Management Trust Company, a wholly-owned subsidiary of
FMR Corp, reported having beneficial ownership of 110,757 shares of Jacor
Common Stock as a result of its serving as investment manager of
institutional accounts. This number of shares includes 55,257 shares of
Jacor Common Stock resulting from the assumed conversion of $4,120,000
principal amount of the LYONs. Mr. Johnson and FMR Corp., through their
control of Fidelity Management Trust Company, each reported having the sole
power to dispose of the 110,757 shares, the sole power to vote or to direct
the voting of 62,884 shares, and no power to vote or to direct the vote of
47,873 shares owned by the institutional accounts. Members of Mr. Johnson's
family and trusts for their benefit are the predominant owners of the Class
B shares of common stock of FMR Corp., representing approximately 49% of the
voting power of FMR Corp. Mr. Johnson owns 12% and Abigail P. Johnson owns
24.5% of the aggregate outstanding voting stock of FMR Corp. Mr. Johnson is
the Chairman of FMR Corp., and Mrs. Johnson is a director of FMR Corp. The
Johnson family group and all other Class B shareholders of FMR Corp. have
entered into a shareholders' voting agreement under which all Class B shares
of FMR Corp. will be voted in accordance with the majority vote of Class B
shares. Accordingly, members of the Johnson family may be deemed to for a
controlling group with respect to FMR Corp. under the Investment Company Act
of 1940. The address of such entities and persons is 82 Devonshire Street,
Boston, Massachusetts 02109.
(6) On February 12, 1997, Massachusetts Financial Services Company ("MFS") filed
with the Commission a Schedule 13G reporting beneficial ownership of Jacor
Common Stock as of December 31, 1996. MFS reported having sole voting power
with respect to 2,687,349 shares of Jacor Common Stock and sole dispositive
power over 2,759,849 shares of Jacor Common Stock. In the aggregate, MFS
reported beneficial ownership of 2,759,849 shares of Jacor Common Stock,
which are also beneficially owned by other non-reporting entities as well as
MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts
02116-3741.
(7) On September 20, 1996, American Financial Group, Inc., American Financial
Corporation, American Enterprises, Inc., Carl H. Lindner, Carl H. Lindner
III, S. Craig Lindner and Keith E. Lindner filed,
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<PAGE>
as a group, a Schedule 13D reporting beneficial ownership as of September
18, 1996, of 2,182,589 shares of Jacor Common Stock issuable upon the
exercise of 10,723,949 warrants issued to such entities and persons in the
Citicasters Merger. The address of such entities and persons is One East
Fourth Street, Cincinnati, Ohio 45202.
(8) Marsh & McLennan Companies, Inc. ("MMC"), a Delaware corporation, 1166
Avenue of the Americas, New York, New York 10036 is the parent holding
company of Putnam Investments, Inc. ("Putnam"), a Massachusetts corporation,
One Post Office Square, Boston, Massachusetts 02109, which owns two
registered investment advisors, Putnam Investment Management, Inc. ("PIM"),
a Massachusetts corporation, One Post Office Square, Boston, Massachusetts
02109, and The Putnam Advisory Company, Inc. ("PAC"), a Massachusetts
corporation, One Post Office Square, Boston, Massachusetts 02109. On January
27, 1997, MMC, Putnam, PAC and PIM filed as a group, a Schedule 13G
reporting beneficial ownership of Jacor Common Stock as of December 31,
1997. MMC reported having no voting or dispositive power over any shares of
Jacor Common Stock. Putnam reported beneficially owning 2,164,673 shares of
Jacor Common Stock, of which 1,921,173 shares were also beneficially owned
by PIM, and 243,500 shares were also beneficially owned by PAC. Of the
1,921,173 shares of Jacor Common Stock beneficially owned by Putnam and PIM,
Putnam and PIM reported sharing voting power over none of the shares, and
sharing dispositive power over all 1,921,173 shares. Of the 243,500 shares
of Jacor Common Stock reportedly beneficially owned by Putnam and PAC,
Putnam and PAC reported sharing voting power over 116,800 shares, and
sharing dispositive power over all 243,500 shares.
(9) Includes vested options to purchase 17,000 shares.
(10) Mr. Dammeyer indirectly shares beneficial ownership of an 80% limited
partnership interest in ZC Limited. See Note (4) above.
(11) Includes vested options to purchase 17,000 shares. Of the shares indicated,
100 shares are held by Mr. Handy's spouse, as to which Mr. Handy disclaims
beneficial ownership. Also includes 13,000 shares held by H.H. Associates
Trust, of which Mr. Handy is co-trustee.
(12) Includes vested options to purchase 523,010 shares. Of the shares
indicated, 397 shares are owned by members of Mr. Lawrence's family.
(13) Includes vested options to purchase 467,200 shares. The number of shares
indicated includes shares held as co-trustee under the Jacor Communications,
Inc. Retirement Plan (the "Retirement Plan"). See Note (14) below. Also
includes 15 shares as to which Mr. Michaels disclaims beneficial ownership.
Does not include 300,000 shares subject to a contingent right of acquisition
held by a corporation owned by Mr. Michaels.
(14) Includes 214,270 shares held under the Retirement Plan with respect to
which Messrs. Michaels, Weber and Berry as co-trustees, share voting and
investment power. Of these 214,270 shares, 10,803 shares are beneficially
owned by the named executives.
(15) Includes vested options to purchase 7,000 shares. Mrs. Rosenberg indirectly
shares beneficial ownership of an 80% limited partnership interest in ZC
Limited. See Note (4) above. Also, Mrs. Rosenberg is a partner in SZ2 (IGP)
Partnership, an Illinois general partnership ("SZ2"), which beneficially
owns 60,243 shares issuable upon the exercise of certain warrants. Other
partners of SZ2 include trusts created for the benefit of Mr. Zell. As a
result, Mrs. Rosenberg and Mr. Zell may be deemed to be the beneficial
owners of the warrants. Mrs. Rosenberg and Mr. Zell disclaim beneficial
ownership of such warrants. See Note (16) below. Also includes 347,850
shares beneficially owned by Samstock, L.L.C. ("Samstock"), a Delaware
limited liability company whose sole member is SZ Investments, L.L.C.
("SZ"), a Delaware limited liability company. The members of SZ include
partnerships composed of trusts for whom Mrs. Rosenberg and Mr. Zell serve
as trustees. As a result,
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<PAGE>
Mrs. Rosenberg and Mr. Zell may be deemed the beneficial owners of the
shares held by Samstock. See Note (16) below.
(16) Includes 5,000 shares beneficially owned by the Rochelle Zell Revocable
Trust for which Mr. Zell serves as a co-trustee. Also includes 60,243 shares
issuable pursuant to warrants. The warrants are beneficially owned by SZ2.
Certain partners of SZ2 include Mrs. Rosenberg and trusts created for the
benefit of Mr. Zell. As a result, Mrs. Rosenberg and Mr. Zell may be deemed
to be beneficial owners of the warrants reported herein. Mrs. Rosenberg and
Mr. Zell disclaim beneficial ownership of such warrants. Also includes
347,850 shares beneficially owned by Samstock. See Note (15) above.
(17) Includes vested options to purchase 22,912 shares. The number of shares
indicated includes shares held as co-trustee under the Retirement Plan. See
Note (14) above.
(18) Includes vested options to purchase 47,400 shares.
(19) Includes vested options to purchase 254,500 shares. The number of shares
indicated includes shares held as co-trustee under the Retirement Plan. See
Note (14) above.
(20) Includes 115,583 shares issuable pursuant to warrants (beneficial ownership
of 60,258 shares of which is disclaimed, as described in Notes (15) and (16)
above), vested options to purchase 1,460,173 shares and 214,270 shares held
under the Retirement Plan. Does not include an aggregate of 18,700 stock
units granted in July 1996 to Jacor's five non-employee directors (3,740
units to each director) in lieu of cash director fees and a special bonus.
Such units are convertible into Jacor Common Stock upon the earlier of such
a director no longer serving as a director or, except for units issued to
Mr. Dammeyer, when the value of Jacor Common Stock equals or exceeds $53.50
per share for five consecutive trading days. Also does not include an
aggregate of 22,487 stock units granted in November 1996 to certain
executive officers of Jacor (9,569 stock units to each of Messrs. Michaels
and Lawrence, 1,914 stock units to Mr. Owens and 1,435 stock units to Mr.
Berry). Such units are convertible to Jacor Common Stock at the earlier of
the executive officer's retirement, death, permanent disability or
separation from service or upon a change in control of Jacor.
No agreements, formal or informal, exist among the various officers and
directors to vote their shares collectively.
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<PAGE>
BUSINESS OF THE STATIONS
The Stations are licensed in Cleveland, Ohio and provide programming to the
greater Cleveland and Northern Ohio areas and sell broadcasting time to local
and national advertisers. The Stations compete for audience share and
advertising revenue directly with other radio stations and also compete for
advertising revenues with other media, such as broadcast television, cable
television, newspaper, magazine and billboard advertising. The primary source of
the Stations revenue is the sale of advertising time.
WLTF-FM is an adult contemporary stations covering the greater Cleveland
area, and in the Winter 1997 Arbitron report it had a 4.4 share 12+ and ranked
fifth in its target demo of women 25-54 with an 8.8 share. Its primary format
competitors are WDOK-FM and WQAL-FM, which are both adult contemporary stations.
WTAM-AM is a 50,000 watt clear channel News/Talk station which covers the
northern Ohio area in the daytime and the midwestern United States at night. In
the Winter 1997 Arbitron report, WTAM-AM had a 5.3 share 12+ and ranked sixth in
its target demo of men 25-54 with an 6.4 share. Its primary format competitors
are WERE-AM and WKNR-AM, which are all sports stations.
The studio of the Stations are located at 1468 West 9th, Suite 805,
Cleveland, Ohio 44113.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF JACOR
GENERAL
The following discussion should be read in conjunction with the financial
statements of Jacor contained herein.
In the following analysis, Jacor's management discusses station operating
income excluding depreciation and amortization. Station operating income
excluding depreciation and amortization should not be considered in isolation
from, or as a substitute for, operating income, net income or cash flow and
other consolidated income or cash flow statement data computed in accordance
with generally accepted accounting principles or as a measure of Jacor's
profitability or liquidity. Although this measure of performance is not
calculated in accordance with generally accepted accounting principles, it is
widely used in the broadcasting industry as a measure of a company's operating
performance because it assists in comparing station performance on a consistent
basis across companies without regard to depreciation and amortization, which
can vary significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Station operating income excluding depreciation and amortization also
excludes the effect of corporate general and administrative expenses, which
generally do not relate directly to station performance.
General economic conditions have an impact on Jacor's business and financial
results. From time to time the markets in which Jacor operates experience weak
economic conditions that may negatively affect revenue of Jacor. However,
management believes that this impact is somewhat softened by Jacor's diverse
geographical presence.
The financial results of Jacor's business are seasonal. Revenues are
generally higher in the second, third and fourth calendar quarters than in the
first quarter.
The performance of a broadcasting station group, such as Jacor, is
customarily measured by its ability to generate broadcast cash flow. The primary
source of Jacor's revenue is the sale of broadcasting time on its stations for
advertising. Jacor's significant operating expenses are employee salaries,
sports broadcasting rights fees, programming expenses, advertising and promotion
expenses, rental of premises for studios and transmitting equipment and music
license royalty fees. The Company works closely with local station management to
implement cost control measures.
Jacor's revenue is affected primarily by the advertising rates Jacor's
stations are able to charge. These rates are, in large part, based on a
station's ability to attract audiences in the demographic groups targeted by its
advertisers, as principally measured by Arbitron Metro Area Ratings Surveys.
Most advertising contracts are short-term and run only for a few weeks. Most
of Jacor's revenue is generated from local advertising, which is sold by the
station's sales staff. In 1996, approximately 80% of Jacor's gross revenues was
from local advertising and approximately 20% was from national advertising. A
station's local sales staff solicits advertising, either directly from the local
advertiser or through an advertising agency for the local advertiser. National
advertising sales for most of Jacor's radio stations are made by Jacor's
national sales managers in conjunction with the efforts of an independent
advertising representative who specializes in national sales and is compensated
on a commission-only basis.
Sports broadcasting and the full-service programming features play an
integral part in Jacor's operating strategy. As a result, because of the rights
fees and related costs of broadcasting professional baseball, football and
hockey, as well as the costs related to the full-service programming features of
its AM radio stations, Jacor's broadcast cash flow margins are typically lower
than its competitors'.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
ACQUISITIONS AND DISPOSITIONS COMPLETED DURING 1996
In 1996, Jacor completed a number of acquisitions as described under
"BUSINESS OF JACOR-- Recently Completed Radio Station Acquisitions and
Dispositions. The acquisitions completed during 1996 were funded as follows: (i)
$303.6 million proceeds from the public offering of 11.25 million shares of
Common Stock, (ii) $115.2 million in proceeds from the Liquid Yield Option Notes
public offering, (iii) $100 million from the 10 1/8% Senior Subordinated Notes
public offering, (iv) $170 million from the 9 3/4% Senior Subordinated Notes
public offering and (v) $400 million under the Credit Facility.
RADIO STATION ACQUISITIONS COMPLETED DURING THE THREE MONTHS ENDED MARCH 31,
1997
In the first quarter of 1997, Jacor completed acquisitions of 26 radio
stations in 9 different broadcast areas for aggregate consideration of
approximately $244 million, net of $5.8 million placed in escrow in 1996. The
purchase price was funded through borrowings of $77 million under the Credit
Facility, proceeds of $44.5 million from the sale of certain investments, the
issuance of 3.55 million shares of Jacor common stock valued at $105.9 million,
the issuance of warrants to acquire 500,000 shares of Jacor common stock valued
at $5.0 million and the utilization of approximately $6 million in excess cash.
See "BUSINESS OF JACOR--Recently Completed Radio Station Acquisitions and
Dispositions."
RECENTLY COMPLETED RADIO STATION ACQUISITIONS AND DISPOSITIONS
In the second quarter of 1997 and through July 15, 1997, the Company
completed acquisitions of 40 radio stations in 18 broadcast areas for aggregate
consideration of approximately $204.2 million, of which approximately $27.3
million was placed in escrow. The Company also exchanged one radio station for
three additional stations plus $16 million in cash. The acquisitions were funded
primarily from borrowings under the Credit Facility. See "BUSINESS OF
JACOR--Recently Completed Radio Station Acquisitions and Dispositions."
PENDING RADIO STATION ACQUISITIONS AND DISPOSITIONS
Jacor has also entered into agreements which have not yet been consummated
to purchase the FCC licenses and substantially all of the broadcast assets of 24
stations in the following broadcast areas:
<TABLE>
<CAPTION>
TOTAL
PURCHASE ESCROW
LOCATION PRICE AMOUNT PAID
- -------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Santa Barbara, Thousand Oaks and Santa Rosa, California................... 2.0 --
Cleveland, Ohio........................................................... 46.0 --
Cheyenne, Wyoming......................................................... 5.5 0.8
Garden City and Eagle, Idaho.............................................. 8.0 8.0
Salt Lake City, Utah...................................................... 1.2 0.1
Twin Falls, Pocatello and Idaho Falls, Idaho.............................. 12.6 12.6
Iowa City, Iowa........................................................... 8.0 0.4
Sebring, Florida.......................................................... 0.7 0.1
Youngstown, Ohio.......................................................... 11.0 2.5
----------- -----
Total................................................................. $ 95.0 $ 24.6
----------- -----
----------- -----
</TABLE>
In the second quarter of 1997, Jacor entered into a binding agreement to
sell WEZL-FM and WXLY-FM, Charleston, SC, and WXZZ-FM, Lexington to JS
Communications, Inc. for $17.0 million. Jacor also completed the sale of
KCBQ-AM, San Diego to JS Communications, Inc. for $6.0 million and the sale of
KSEG-FM and KRXQ-FM, Sacramento to Entercom Communications, Inc. for $45.0
million.
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COMPLETED SYNDICATION AND OTHER ACQUISITIONS
In the second quarter of 1997, Jacor acquired substantially all of the
assets relating to the broadcast distribution and related print and electronic
media publishing businesses of EFM Media Management, the assets of NSN Network
Services, a leading provider of satellite and network services for the radio
broadcasting industry, the assets of Airwatch Communications, Inc. and
Airtraffic Communications, Inc. and the stock of Premiere Radio Networks, Inc.
See "BUSINESS OF JACOR--Broadcasting Services Acquisitions." These acquisitions
were funded from borrowings under the Credit Facility and proceeds from the 1997
Equity Offerings.
PENDING ACQUISITION FINANCING
As of May 1, 1997, the Company had approximately $562 million of outstanding
indebtedness under the Credit Facility, which includes all borrowings necessary
to fund the recently completed transactions, and available borrowings of $188
million. The Company will finance the pending acquisitions utilizing available
borrowings under the Credit Facility, to the extent available, and proceeds from
a proposed offering of equity securities under the omnibus shelf registration
statement. The Company estimates, after completion of all the pending
acquisitions, outstanding borrowings under the Credit Facility of approximately
$628 million. The Company believes that various additional sources are also
available to fund future acquisitions. Such sources include the issuance of
additional equity and or debt securities of the Company.
CREDIT FACILITIES AND OTHER
In June 1996, the Company entered into a new credit facility (the "Credit
Facility") which provided availability of $600 million. During February 1997,
the Credit Facility was amended resulting in expanded availability of up to $750
million. The Credit Facility provides loans to Jacor in three components: (i) a
reducing revolving credit facility of up to $450 million under which the
aggregate commitments would reduce on a semi-annual basis commencing in June
1999; (ii) a $200 million amortizing term loan that would reduce on a
semi-annual basis commencing in December 1997; and (iii) a $100 million
amortizing term loan that would reduce on a semi-annual basis commencing in
December 1998. The Credit Facility also provides the Company with additional
credit for future acquisitions as well as working capital and other general
corporate purposes. As of June 28, 1997, the Company had $350.8 million of
outstanding indebtedness under the Credit Facility.
The issuance of additional debt would negatively impact the Company's
debt-to-equity ratio and its results of operations and cash flows due to higher
amounts of interest expense. Any issuance of additional equity would soften this
impact to some extent.
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1996
Broadcast revenue for the first quarter of 1997 was $100.2 million, an
increase of $66.6 million or 198.2% from $33.6 million during the first quarter
of 1996. This increase resulted from the revenue generated at those properties
owned or operated during the first quarter of 1997 but not during the comparable
1996 period. On a "same station" basis--reflecting results from stations
operated in the first quarter of both 1997 and 1996--broadcast revenue for 1997
was $35.8 million, an increase of $4.7 million or 15.1% from $31.1 million for
1996. This increase resulted from an increase in advertising rates in both local
and national advertising.
Agency commissions for the first quarter of 1997 were $11.3 million, an
increase of $7.8 million or 223.8% from $3.5 million during the first quarter of
1996 due to the increase in broadcast revenue.
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Broadcast operating expenses for the first quarter of 1997 were $67.3
million, an increase of $43.4 million or 182.0% from $23.9 million during the
first quarter of 1996. These expenses increased as a result of expenses incurred
at those properties owned or operated during the first quarter of 1997 but not
during the comparable 1996 period. On a "same station" basis, broadcast
operating expenses for the first quarter of 1997 were $28.3 million, an increase
of $2.9 million or 11.5% from $25.4 million for the first quarter of 1996. This
increase resulted from increased selling, payroll and programming costs.
Depreciation and amortization for the first quarter of 1997 and 1996 was
$13.4 million and $2.6 million, respectively. This increase was due to the
acquisitions in 1996 and the first quarter of 1997.
Operating income for the first quarter of 1997 was $5.4 million, an increase
of $3.0 million or 120.4% from an operating income of $2.4 million for the first
quarter of 1996.
Interest expense in the first quarter of 1997 was $17.2 million, an increase
of $15.1 million from $2.1 million in the first quarter of 1996. Interest
expense increased due to an increase in outstanding debt that was incurred in
connection with acquisitions.
The gain on the sale of assets in 1997 resulted from the sale of the News
Corp. Warrants in February 1997. The gain on the sale of assets in 1996 resulted
from the sale of two FM radio stations in Knoxville.
Income tax benefit was $4.1 million for the first quarter of 1997 and income
tax expense for the first quarter of 1996 was $1.3 million. The effective tax
rate increased in the first quarter of 1997 due to an increase in non-deductible
goodwill resulting from acquisitions.
In the first quarter of 1997 the Company recognized an extraordinary loss of
approximately $5.6 million related to the write off of debt financing costs.
Also, in the first quarter of 1996, the Company recognized an extraordinary loss
of approximately $1.0 million related to the write off of debt financing costs.
Net loss for the first quarter of 1997 was $8.1 million, compared to net
income of $0.9 million reported by the Company for the first quarter of 1996.
THE YEAR ENDED 1996 COMPARED TO THE YEAR ENDED 1995
Broadcast revenue for 1996 was $250.5 million, an increase of $117.4 million
or 88.2% from $133.1 million during 1995. This increase resulted from the
revenue generated at those properties owned or operated during 1996 but not
during the comparable 1995 period. On a "same station" basis--reflecting results
from stations operated for the entire twelve months of both 1996 and
1995--broadcast revenue for 1996 was $135.5 million, an increase of $13.8
million or 11.3% from $121.7 million for 1995. This increase resulted from an
increase in advertising rates in both local and national advertising.
Agency commissions for 1996 were $26.7 million, an increase of $12.5 million
or 87.9% from $14.2 million during 1995 due to the increase in broadcast
revenue.
Broadcast operating expenses for 1996 were $151.1 million, an increase of
$63.8 million or 73.1% from $87.3 million during 1995. These expenses increased
as a result of expenses incurred at those properties owned or operated during
1996 but not during the comparable 1995 period. On a "same station" basis,
broadcast operating expenses for 1996 were $82.9 million, an increase of $4.9
million or 6.3% from $78.0 million for 1995. This increase resulted from
increased selling, payroll and programming costs.
Depreciation and amortization for 1996 and 1995 was $23.4 million and $9.5
million, respectively. This increase was due to the acquisitions in 1996.
Operating income for 1996 was $39.4 million, an increase of $20.8 million or
111.4% from an operating income of $18.6 million for 1995.
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In 1996 the Company recognized an extraordinary loss of approximately $3.0
million related to the write off of debt financing costs. Also, in the first
quarter of 1997, the Company recognized an extraordinary loss of approximately
$5.8 million related to the write off of debt financing costs.
Interest expense in 1996 was $32.2 million, an increase of $30.8 million
from $1.4 million in 1995. Interest expense increased due to an increase in
outstanding debt that was incurred in connection with acquisitions.
Net income for 1996 was $5.1 million, compared to net income of $11.0
million reported by the Company for 1995.
Income tax was $7.3 million for 1996 and 1995. The effective tax rate
increased in 1996 due to an increase in non-deductible goodwill resulting from
the 1996 acquisitions.
THE YEAR ENDED 1995 COMPARED TO THE YEAR ENDED 1994
Broadcast revenue for 1995 was $133.1 million, an increase of $13.5 million
or 11.3% from $119.6 million during 1994. This increase resulted from an
increase in advertising rates in both local and national advertising and from
the revenue generated at those properties owned or operated during 1995 but not
during the comparable 1994 period. On a "same station" basis--reflecting results
from stations operated for the entire twelve months of both 1995 and
1994--broadcast revenue for 1995 was $125.3 million, an increase of $8.4 million
or 7.2% from $116.9 million for 1994.
Agency commissions for 1995 were $14.2 million, an increase of $1.6 million
or 12.6% from $12.6 million during 1994 due to the increase in broadcast
revenue. Agency commissions increased at a greater rate than broadcast revenue
due to a greater proportion of agency sales.
Broadcast operating expenses for 1995 were $87.3 million, an increase of
$6.8 million or 8.5% from $80.5 million during 1994. These expenses increased as
a result of increased selling and other payroll costs, programming costs and
expenses incurred at those properties owned or operated during 1995 but not
during the comparable 1994 period. On a "same station" basis, broadcast
operating expenses for 1995 were $81.3 million, an increase of $4.2 million or
5.5% from $77.1 million for 1994.
Depreciation and amortization for 1995 and 1994 was $9.5 million and $9.7
million, respectively.
Operating income for 1995 was $18.6 million, an increase of $5.1 million or
38.1% from an operating income of $13.5 million for 1994.
Interest expense for 1995 was $1.4 million, an increase of $0.9 million or
170.1% from $0.5 million for 1994. Interest expense increased due to an increase
in outstanding debt that was incurred in connection with acquisitions and stock
repurchases.
Net income for 1995 was $11.0 million, compared to net income of $7.9
million reported by the Company for 1994. The 1994 period includes income tax
expense of $6.3 million, while the 1995 period includes $7.3 million of income
tax expense.
CASH FLOWS
Cash flows provided by operating activities, inclusive of working capital,
were $4.5 million and $4.0 million for the three months ended March 31, 1997 and
1996, respectively. Cash flows provided by operating activities for the first
quarter of 1997 resulted primarily from the add-back of $13.4 million of
depreciation and amortization together with the add-back of $5.6 million for the
extraordinary loss net of ($4.7) million from the gain on sale of radio stations
together with the ($1.7) million net change in working capital resulting in a
net loss of ($8.1) million for the period. Cash flows provided by operating
activities for the comparable 1996 period resulted primarily from the add-back
of $2.6 million of depreciation and amortization together with the add-back of
$1.0 million for the extraordinary loss net of ($2.5) million from the gain on
sale of radio stations to net income of $0.9 million for the period.
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Cash flows used by investing activities were ($96.6) million and ($140.3)
million for the three months ended March 31, 1997 and 1996, respectively.
Investing activities include capital expenditures of $4.9 million and $3.4
million for the first quarter of 1997 and 1996, respectively. Investing
activities during the first quarter of 1997 resulted primarily from the
acquisition of broadcast properties of $131.1 million partially offset by the
proceeds from the sale of the News Corp. Warrants. Investing activities during
the first quarter of 1996 include expenditures of $48.1 million, $52.8 million,
$41.6 million and $0.8 million, respectively, for acquisitions, the purchase of
the Noble warrant, loans made to Noble and in connection with the Company's JSAs
and other. Additionally, investing activities for the 1996 period is net of $6.5
million of proceeds from the sale of radio stations WMYU-FM and WWST-FM in
Knoxville.
Cash flows provided by financing activities were $26.3 million and $134.7
million for the three months ended March 31, 1997 and 1996, respectively. Cash
flows provided by financing activities during the first quarter of 1997 resulted
primarily from the $27.0 million net borrowings under the Credit Facility
partially offset by $0.7 million of paid finance costs. Cash flows provided by
financing activities during the first quarter of 1996 resulted primarily from
the $190.0 million in borrowings under the former credit facility, together with
$0.5 million in proceeds received from the issuance of common stock upon the
exercise of outstanding stock options net of the $52.0 million of reduction in
long-term debt and $3.7 million of paid finance costs.
Cash flows provided by operating activities, inclusive of working capital,
were $24.9 million, $20.6 million and $11.3 million for 1996, 1995 and 1994,
respectively. Cash flows provided by operating activities in 1996 resulted
primarily from $28.7 million in non-cash expenses, a $3.0 million add-back of
the write-off of debt related financing costs, partially offset by the ($2.5)
million gain on the sale of radio stations and the net change in working capital
of ($10.5) million. Cash flows provided by operating activities in 1995 resulted
primarily from the add-back of $9.5 million of depreciation and amortization
expense to net income of $11.0 million for the period. Cash flows provided by
operating activities in 1994 resulted primarily from net income of $7.9 million
generated during the year. The additional $3.4 million resulted principally from
the excess of the sum of the depreciation and amortization add-back of $9.7
million, together with the add-back of $1.4 million for provision for losses on
accounts and notes receivable over the net change in working capital of ($7.6)
million.
Cash flows used by investing activities were $859.3 million, $64.3 million
and $13.7 million for 1996, 1995 and 1994, respectively. Investing activities
include capital expenditures of $11.9 million, $5.0 million and $2.2 million in
1996, 1995 and 1994, respectively. Investing activities in 1996 and 1995
included expenditures of $854.0 million and $59.8 million, respectively, for
acquisitions, the purchase of intangible assets and loans made in connection
with the Company's JSAs. In addition, 1996 investing activities were net of $6.6
million of proceeds from the sale of radio stations and 1994 investing
activities were net of $3.2 million of payments received on notes and from the
sale of assets.
Cash flows provided by financing activities were $905.1 million, $24.2
million and $0.7 million for 1996, 1995 and 1994, respectively. Cash flows
provided by financing activities in 1996 resulted primarily from: (i) the $115.2
million issuance of Liquid Yield Option Notes; (ii) the $100.0 million issuance
of 10 1/8% Senior Subordinated Notes; (iii) the $170.0 million issuance of
9 3/4% Senior Subordinated Notes; (iv) net proceeds of $316.7 million from the
issuance of common stock; and (v) borrowings, net of repayments, of $354.5
million under the Bank Credit Facilities. These proceeds were partially offset
by the payment of $27.4 million in financing costs and the $123.1 million payoff
of the Citicasters 9 3/4% Senior Subordinated Notes. Cash flows provided by
financing activities in 1995 resulted primarily from the $45.5 million in
borrowings under the 1993 Credit Agreement, together with $0.8 million in
proceeds received from the issuance of common stock to the Company's employee
stock purchase plan and upon the exercise of outstanding stock options net of
the $21.7 million used to repurchase common stock. Cash flows from financing
activities in 1994 resulted primarily from the proceeds received from the
issuance of common stock upon the exercise of outstanding stock options.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE STATIONS
The following discussion of the financial condition and results of
operations of the Stations should be read in conjunction with the unaudited
combined condensed financial statements of the Stations contained herein.
The two components of the Stations operating income are net revenues (gross
revenues less agency commissions) and operating expenses including depreciation
and amortization. The primary source of revenues is the sale of broadcasting
time for advertising. The Stations' most significant operating expenses are
employee salaries and commissions, programming expenses, and advertising and
promotion expenses. The Stations' revenues vary throughout the year. As is
typical in the radio broadcasting industry, the Stations' first calendar quarter
generally produces the lowest revenues, and the fourth quarter generally
produces the highest revenues.
Operating income does not take into account the Stations' debt service
requirements, income taxes and other commitments and, accordingly, operating
income is not necessarily indicative of amounts that may be available for
dividends, reinvestment in the Stations' business or other discretionary uses.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
NET REVENUE of the Stations decreased 2% to $1.8 million from $1.84 million
for the three months ended March 31, 1997 ("1997 quarter") and March 31, 1996
("1996 quarter"), respectively. The 1997 revenue decrease was caused by the
decline in the WLTF-FM ratings which was offset in part by the higher revenue
from WTAM-AM due to higher ratings in the 1997 quarter as compared to the 1996
quarter.
BROADCASTING OPERATING EXPENSES in the 1997 quarter decreased 15% as
compared to the 1996 quarter. In the 1997 quarter broadcasting operating
expenses were $1.78 million as compared to $2.1 million in the 1996 quarter. The
15% decrease in the operating expenses was primarily due to the fact that
WLTF-FM had lower marketing and promotion expenses in 1997 than in 1996.
DEPRECIATION AND AMORTIZATION increased 5% to $0.28 in the 1997 quarter from
$0.27 million in the 1996 quarter.
OPERATING INCOME (LOSS) and INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS
increased from a loss of $0.66 million in the 1996 quarter to a loss of $0.49
million in the 1997 quarter due to the results discussed above.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET REVENUE of the Stations increased 3% to $9.72 million in 1996 from $9.41
million in 1995 primarily as a result of increased revenues from WTAM-AM due to
higher ratings in 1996 as compared to 1995.
BROADCAST OPERATING EXPENSES increased 3% to $7.77 million in 1996 from
$7.53 million in 1995, primarily due to increased marketing and promotion for
WLTF-FM in 1996.
DEPRECIATION AND AMORTIZATION decreased 9% from $1.15 million in 1995 to
1.05 million in 1996.
OPERATING INCOME (LOSS) and INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS
increased 118% to $0.17 million in 1996 from $0.08 million in 1995 due to the
results discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Stations historically have generated sufficient cash flow from operating
to finance its existing operations requirements.
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RIGHTS OF STOCKHOLDERS
Secret is a Delaware limited partnership. The rights of Secret's partners
are governed by Delaware law and a partnership agreement. Jacor is incorporated
under the laws of the State of Delaware, and Jacor's stockholders' rights are
governed by Delaware law, Jacor's Certificate of Incorporation ("Jacor
Certificate") and Jacor's Bylaws (the "Jacor Bylaws").
Upon consummation of the Acquisition and receipt of the Stock Consideration,
the Secret partners will become security holders of Jacor and, accordingly,
their rights will be governed by Delaware law, the Jacor Certificate and the
Jacor Bylaws.
The following is a summary of the rights of Jacor stockholders under the
Jacor Certificate and Jacor Bylaws. The following does not purport to be a
complete statement of the rights of Jacor stockholders under applicable Delaware
law, or a complete summary of the Jacor Certificate or Jacor Bylaws. The
following description is qualified in its entirety by reference to the Jacor
Certificate and the Jacor Bylaws.
CAPITAL STOCK. As described under "DESCRIPTION OF JACOR CAPITAL STOCK," the
Jacor Certificate authorizes 104,000,000 shares of capital stock, of which
100,000,000 shares are Common Stock, 2,000,000 shares are Class A Preferred
Stock, $.01 par value and 2,000,000 shares are Class B Preferred Stock, $.01 par
value. The Jacor Certificate permits the Jacor Board of Directors to exercise
broad discretion in fixing the terms of series of the preferred stock, which is
subject to Delaware law and the terms of the Jacor Certificate. The preferred
stock is senior to the Jacor Common Stock, and so long as any preferred stock is
outstanding, no dividend shall be declared or paid on the Jacor Common Stock or
any other class of shares junior to the preferred stock. The holders of the
Jacor Common Stock and the Class A Preferred Stock have full voting rights
(provided that the Jacor Common Stock and the Class A Preferred Stock vote
together, and not separately). The holders of the Class B Preferred Stock are
not entitled to vote at meetings of stockholders, except as required by law or
as lawfully fixed by the Board of Directors.
BOARD OF DIRECTORS; COMMITTEES. The Jacor Bylaws provide that the Board of
Directors shall be composed of such number of members as the Board of Directors
shall from time to time designate, except in the absence of such designation,
the number of members shall be seven. The Jacor Board of Directors currently
consists of ten members.
Under Jacor's Bylaws, the Board of Directors may designate, by a vote of a
majority of the directors, one or more committees to consist of one or more
members of the board of directors. The Jacor Bylaws provide that, to the extent
provided by the Board of Directors, any committee designated by the Board of
Directors may exercise the power and authority of the Board of Directors to
declare dividends, authorize the issuance of stock or to adopt a certificate of
ownership pursuant to Section 253 of the DGCL. One-third of a committee's
members constitute a quorum, unless the committee consists of one or two
members, in which case one member constitutes a quorum. Each committee may adopt
its own rules regarding the conduct of meetings, except as required by law or in
the Jacor Bylaws.
PREEMPTIVE RIGHTS. The Jacor Certificate provides that no stockholder shall
have preemptive rights to purchase shares.
CUMULATIVE VOTING. Neither the Jacor Certificate nor the Jacor Bylaws,
provide for cumulative voting in the election of directors.
AMENDMENTS TO BYLAWS. Under the Jacor Certificate, the directors are
granted the power to amend or repeal the existing bylaws or adopt new bylaws,
although such power does not preempt or otherwise affect the power of the
stockholders also to amend the bylaws.
INDEMNIFICATION; LIMITS ON DIRECTOR LIABILITY. The Jacor Certificate
provides for indemnification of directors, officers, employees and agents of the
company to the fullest extent permitted by Delaware law.
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Also, the Jacor Certificate limits the personal liability of directors, except
for a breach of a director's duty of loyalty to the corporation or its
shareholders or for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for willful or negligent
conduct in paying dividends or repurchasing stock out of other than legally
available funds, or for any transaction from which a director derived an
improper personal benefit.
COMPROMISE WITH CREDITORS AND STOCKHOLDERS. Delaware law provides that a
certificate of incorporation may contain a provision allowing for a compromise
or arrangement between a corporation and its creditors or stockholders. Under
such a provision, whenever such a compromise or arrangement is proposed, a
Delaware court may order a meeting for the purpose of eliciting an agreement to
the compromise or the arrangement which would be binding on all such creditors
and/or stockholders and the corporation. The Jacor Certificate contains such a
provision.
DESCRIPTION OF JACOR CAPITAL STOCK
Jacor's Certificate of Incorporation authorizes 104,000,000 shares of
capital stock, of which 100,000,000 shares are Common Stock, 2,000,000 shares
are Class A Preferred Stock, $.01 par value and 2,000,000 shares are Class B
Preferred Stock, $.01 par value (together with the Class A Preferred Stock, the
"Preferred Stock"). As of June 12, 1997, 44,675,934 shares of Common Stock were
issued and outstanding.
COMMON STOCK
Under Jacor's Certificate of Incorporation and Delaware law, the holders of
Common Stock have no preemptive rights and the Common Stock has no redemption,
sinking fund, or conversion privileges. The holders of Common Stock are entitled
to one vote for each share held on any matter submitted to the stockholders and
do not have the right to cumulate their votes in the election of director. All
corporate action requiring stockholder approval, unless otherwise required by
law, Jacor's Certificate of Incorporation or its Bylaws, must be authorized by a
majority of the votes cast. Approval of only a majority of the outstanding
voting shares is required to effect (i) an amendment to Jacor's Certificate of
Incorporation, (ii) a merger or consolidation, and (iii) a disposition of all or
substantially all of Jacor's assets. A majority of the directors on the Jacor
Board of Directors, as well as a majority of the outstanding voting shares, have
the ability to amend the Jacor Bylaws.
In the event of liquidation, each share of Common Stock is entitled to share
ratably in the distribution of remaining assets after payment of all debts,
subject to the prior rights in liquidation of any share of preferred stock
issued. Holders of shares of Common Stock are entitled to share ratably in such
dividends as the Jacor Board of Directors, in its discretion, may validly
declare from funds legally available therefor, subject to the prior rights of
holders of shares of Jacor's preferred stock as may be outstanding from time to
time. Certain restrictions on the payment of dividends are imposed under the
Credit Facility. See "Risk Factors-Lack of Dividends; Restrictions on Payments
of Dividends."
Jacor's Certificate of Incorporation provides that outstanding shares of
Common Stock held by a Disqualified Holder (as defined below) are subject to
redemption by the Company, by action of the Jacor Board of Directors to the
extent necessary to prevent the loss or secure the reinstatement of any license
or franchise from any governmental agency held by the Company or any of its
subsidiaries, which license or franchise is conditioned upon some or all of the
holders of the Company's stock possessing prescribed qualifications and/or
restrictions. The Certificate of Incorporation prescribes the following terms
and conditions for such redemption: (a) the redemption price of the shares to be
redeemed shall be equal to the lesser of (i) the Fair Market Value (as defined
below) of such shares or (ii) if such stock was purchased by such Disqualified
Holder within one year of the redemption date, such Disqualified Holder's
purchase price for such shares; (b) the redemption price of such shares may be
paid in cash, securities (valued according to a specified method) or any
combination thereof; (c) if less than all the shares held by
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Disqualified Holders are to be redeemed, the shares to be redeemed will be
selected in such manner as is determined by the Jacor Board of Directors, which
may include selection first of the most recently purchased shares thereof,
selection by lot or selection in any other manner determined by the Jacor Board
of Directors; (d) at least 30 days written notice of the redemption date must be
given to the record holders of the shares selected to be redeemed (unless waived
in writing by such holder), provided that the redemption date may be on the date
on which written notice is given to such record holders if the cash or
securities necessary to effect the redemption shall have been deposited in trust
for the benefit of such record holders and subject to immediate withdrawal by
them upon surrender of the stock certificates for their shares to be redeemed;
(e) from and after the redemption date, any and all rights of whatever nature,
which may be held by the owners of shares called for redemption (including
without limitation any rights to vote or participate in dividends declared on
stock of the same class or series as such shares), shall cease and terminate and
they shall thenceforth be entitled only to receive the cash or securities
payable in respect of such redemption; and (f) such other terms and conditions
as the Jacor Board of Directors may determine.
For purposes of the foregoing provisions of the Certificate of
Incorporation, the following meanings are assigned to certain terms:
"Disqualified Holder" means any holder of shares of capital stock of the Company
whose holding of such stock, either individually or when taken together with the
holding of shares of stock of the Company by any other holders, may result, in
the judgment of the Jacor Board of Directors, in the loss of, or the failure to
secure the reinstatement of, any license or franchise from any governmental
agency held by the Company or any of its subsidiaries to conduct any portion of
the business of the Company or its subsidiaries. "Fair Market Value" of the
Company's stock of any class or series of stock means the average closing price
for such a share for each of the 45 most recent days on which the shares of
stock of such class or series were traded preceding the day on which notice of
redemption was given, except that if such shares of stock of such class or
series are not traded on any securities exchange or in the over-the-counter
market, "Fair Market Value" is any value determined by the Jacor Board of
Directors in good faith. See "RISK FACTORS--FCC Regulation of Broadcasting
Industry."
CLASS A AND CLASS B PREFERRED STOCK
No shares of Preferred Stock have been issued. The Class A Preferred Stock
has full voting rights. The Class B Preferred Stock has no voting rights except
as otherwise provided by law or as lawfully fixed by the Board of Directors with
respect to a particular series.
Jacor's Certificate of Incorporation authorizes the Jacor Board to provide
from time to time for the issuance of the shares of Preferred Stock and by
resolution to establish the terms of each such series, including (i) the number
of shares of the series and the designation thereof; (ii) the rights in respect
of dividends on the shares; (iii) liquidation rights; (iv) redemption rights;
(v) the terms of any purchase, retirement or sinking fund to be provided for the
shares of the series; (vi) terms of conversion, if any; (vii) restrictions,
limitations and conditions, if any, on issuance of indebtedness of Jacor; (viii)
voting rights; and (ix) any other preferences and other rights and limitations
not inconsistent with law, the Certificate of Incorporation, or any resolution
of the Jacor Board.
The issuance of Preferred Stock, while providing flexibility in connection
with the possible acquisitions and other corporate purposes, could among other
things adversely affect the rights of holders of Common Stock, and, under
certain circumstances, make it more difficult for a third party to gain control
of Jacor. In the event that shares of Preferred Stock are issued and convertible
into shares of Common Stock the holders of Common Stock may experience dilution.
CITICASTERS WARRANTS
Jacor issued the Citicasters Warrants pursuant to the terms of the
Citicasters Merger agreement. If all of the Citicasters Warrants are exercised,
4,400,000 shares of Jacor Common Stock would be issued. Each
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Citicasters Warrant initially entitles the holder thereof to purchase .2035247
of a share of Jacor Common Stock at a price of $28.00 per full share (the
"Citicasters Price"). The Citicasters Price and the number of shares of Jacor
Common Stock issuable upon the exercise of each Citicasters Warrant are subject
to adjustment in certain events described below. Each Citicasters Warrant may be
exercised until 5:00 p.m., Eastern Time, on September 18, 2001 (the "Citicasters
Expiration Date") in accordance with the terms of the Citicasters Warrants and
Citicasters warrant agreement. To the extent that any Citicasters Warrant
remains outstanding after such time, such unexercised Citicasters Warrant will
automatically terminate.
Citicasters Warrants may be exercised by surrendering to the warrant agent a
signed Citicasters Warrant certificate together with the form of election to
purchase on the reverse thereof indicating the warrantholder's election to
exercise all or a portion of the Citicasters Warrants evidenced by such
certificate. Surrendered certificates must be accompanied by payment of the
aggregate Citicasters Price in respect of the Citicasters Warrant to be
exercised, which payment may be made in cash or by certified or bank cashier's
check drawn on a banking institution chartered by the government of the United
States or any state thereof payable to the order of Jacor. No adjustments as to
cash dividends with respect to the Jacor Common Stock will be made upon any
exercise of Citicasters Warrants.
If fewer than all of the Citicasters Warrants evidenced by any certificate
are exercised, the warrant agent will deliver to the exercising warrantholder a
new Citicasters Warrant certificate representing the unexercised Citicasters
Warrants. Jacor will not be required to issue fractional shares of Jacor Common
Stock upon exercise of any Citicasters Warrant and in lieu thereof will pay in
cash an amount equal to the same fraction of the closing price per share of the
Jacor Common Stock, determined as provided in the Citicasters warrant agreement.
Jacor has reserved for issuance a number of shares of Jacor Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
the Citicasters Warrants.
A Citicasters Warrant may not be exercised in whole or in part if in the
reasonable opinion of counsel to Jacor the issuance of Jacor Common Stock upon
such exercise would cause Jacor to be in violation of the Communications Act or
the rules and regulations in effect thereunder.
The number of shares of Jacor Common Stock purchasable upon the exercise of
each Citicasters Warrant and the Citicasters Price are subject to the adjustment
in connection with (i) the issuance of a stock dividend to holders of Jacor
Common Stock, a combination or subdivision or issuance by reclassification of
Jacor Common Stock; (ii) the issuance of rights, options or warrants to all
holders of Jacor Common Stock without charge to such holders to subscribe for or
purchase shares of Jacor Common Stock at a price per share which is lower than
the current market price; and (iii) certain distributions by Jacor to the
holders of Jacor Common Stock of evidences of indebtedness or of its assets
(excluding cash dividends, or distributions out of earnings or out of surplus
legally available for dividends) or of convertible securities, all as set forth
in the Citicasters Warrant Agreement. Notwithstanding the foregoing, no
adjustment in the number of shares of Jacor Common Stock issuable upon the
exercise of Citicasters Warrants will be required until such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
shares of Jacor Common Stock purchasable upon the exercise of each Citicasters
Warrant. In addition, Jacor may at its option reduce the Citicasters Price.
In case of any consolidation or merger of Jacor with or into another
corporation, or any sale, transfer or lease to another corporation of all or
substantially all of the property of Jacor, the Citicasters warrant agreement
requires that effective provisions be made so that each holder of an outstanding
Citicasters Warrant will have the right thereafter to exercise the Citicasters
Warrant for the kind and amount of securities and property receivable in
connection with such consolidation, merger, sale, transfer or lease by a holder
of the number of shares of Jacor Common Stock for which such Citicasters Warrant
were exercisable immediately prior thereto. In addition, if Jacor takes any
action prior to the issuance of the Citicasters Warrants that would have
required an adjustment in the exercise price of the Citicasters Warrants or in
the number of shares purchasable upon exercise of the Citicasters Warrants, then
the exercise price of the Citicasters Warrants or such number of shares will be
adjusted upon issuance of the
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Citicasters Warrants to give effect to the adjustment which would have been
required as a result of such action.
The Citicasters warrant agreement may be amended or supplemented without the
consent of the holders of Citicasters Warrants to cure any ambiguity or to
correct or supplement any defective or inconsistent provision contained therein,
or to make such other necessary or desirable changes which shall not adversely
affect interest of the warrantholders. Any other amendment to the Citicasters
warrant agreement requires the consent of warrantholders representing not less
than 50% of the Citicasters Warrants then outstanding provided that no change in
the number or nature of the securities purchasable upon the exercise of any
Citicasters Warrant, or the Citicasters Price therefor, or the acceleration of
the Citicasters Expiration Date, and no change in the antidilution provisions
which would adversely affect the interest of the holders of Citicasters
Warrants, shall be made without the consent of the holder of such Citicasters
Warrant, other than such changes as are specifically prescribed by the
Citicasters warrant agreement or are made in compliance with the applicable law.
No holder of Citicasters Warrants is entitled to vote or receive dividends
or be deemed for any purpose the holder of Jacor Common Stock until the
Citicasters Warrants are properly exercised as provided in the Warrant
Agreement.
REGENT WARRANTS
Jacor issued one warrant to acquire a fractional share of Jacor Common Stock
(the "Regent Warrants") for each outstanding share of Regent common stock
pursuant to the terms of the October 1996 definitive merger agreement (the
"Regent Merger Agreement") entered into by Jacor and Regent Communications, Inc.
("Regent"), whereby Regent merged with and into Jacor (the "Regent Merger"). If
all of the Regent Warrants are exercised, 500,000 shares of Jacor Common Stock
would be issued. Each Regent Warrant initially entitles the holder thereof to
purchase .10877 of a share of Jacor Common Stock at a price of $40.00 per full
share of Jacor Common Stock (the "Regent Price"). The Regent Price and the
number of shares of Jacor Common Stock issuable upon the exercise of each Regent
Warrant are subject to adjustment if certain events described below occur. Each
Regent Warrant may be exercised on or after the issuance thereof and until 5:00
pm., Eastern Time, on the fifth anniversary of the date that the Regent Merger
becomes effective (the "Regent Expiration Date") in accordance with the terms of
the Regent Warrants and the Regent Warrant Agreement; PROVIDED, HOWEVER, if any
of the Regent Warrants are called for redemption by Jacor, at a price per Regent
Warrant equal to $12.00 multiplied by the Fraction, as adjusted from time to
time under the terms of the Regent Warrant Agreement, on or after the third
anniversary of the "Effective Time" (as defined in the Regent Warrant
Agreement), the right to so redeem the Regent Warrants shall expire at the close
of business, New York time, on such redemption date. To the extent that any
Regent Warrant remains outstanding after such time, such unexercised Regent
Warrant will automatically terminate.
Regent Warrants may be exercised by surrendering to the warrant agent a
signed Regent Warrant certificate together with the form of election to purchase
on the reverse thereof indicating the warrant holder's election to exercise all
or a portion of the Regent Warrants evidenced by such certificate. Surrendered
certificates must be accompanied by payment of the aggregate Regent Price in
respect of the Regent Warrants to be exercised, which payment may be made in
cash or by certified or bank cashier's check drawn on a banking institution
chartered by the government of the United States or any state thereof payable to
the order of Jacor. No adjustments as to cash dividends with respect to the
Jacor Common Stock will be made upon any exercise of Regent Warrants.
If fewer than all the Regent Warrants evidenced by any certificate are
exercised, the warrant agent will deliver to the exercising warrant holder a new
Regent Warrant certificate representing the unexercised Regent Warrants. Jacor
will not be required to issue fractional shares of Jacor Common Stock upon
exercise of any Regent Warrant and in lieu thereof will pay in cash an amount
equal to the same fraction of
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the closing price per share of Jacor Common Stock, determined as provided in the
Regent Warrant Agreement. Jacor has reserved for issuance a number of shares of
Jacor Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the Regent Warrants.
A Regent Warrant may not be exercised in whole or in part if in the
reasonable opinion of counsel to Jacor the issuance of Jacor Common Stock upon
such exercise would cause Jacor to be in violation of the Communications Act or
the rules and regulations in effect thereunder.
The number of shares of Jacor Common Stock purchasable upon the exercise of
each Regent Warrant and the Regent Price are subject to adjustment in connection
with (i) the issuance of a stock dividend to holders of Jacor Common Stock, a
combination or subdivision or issuance by reclassification of Jacor Common
Stock; (ii) the issuance of rights, options or warrants to all holders of Jacor
Common Stock without charge to such holders to subscribe for or purchase shares
of Jacor Common Stock at a price per share which is lower than the current
market price; and (iii) certain distributions by Jacor to the holders of Jacor
Common Stock of evidences of indebtedness or of its assets (excluding cash
dividends or distributions pursuant to an announced policy of Jacor payable out
of earnings or out of surplus legally available for dividends) or of convertible
securities, all as set forth in the Regent Warrant Agreement. Notwithstanding
the foregoing, no adjustment in the number of shares of Jacor Common Stock
issuable upon the exercise of the Regent Warrants will be required until such
adjustment would require an increase or decrease of at least one percent (1%) in
the number of shares of Jacor Common Stock purchasable upon the exercise of each
Regent Warrant. In addition, Jacor may at its option reduce the Regent Price to
any amount deemed appropriate by the Jacor Board of Directors.
In case of any consolidation or merger of Jacor with or into another
corporation, or any sale, transfer or lease to another corporation of all or
substantially all the property of Jacor, the Regent Warrant Agreement requires
that effective provisions will be made so that each holder of an outstanding
Regent Warrant will have the right thereafter to exercise the Regent Warrant for
the kind and amount of securities and property receivable in connection with
such consolidation, merger, sale, transfer or lease by a holder of the number of
shares of Jacor Common Stock for which such Regent Warrant were exercisable
immediately prior thereto. In addition, pending execution of the Regent Warrant
Agreement, the Regent Merger Agreement provides that, if after the date of the
Regent Merger Agreement and prior to the issuance of the Regent Warrants, Jacor
takes any action which, if the Regent Warrants had been issued and outstanding
as of such date, would have required an adjustment in the exercise price of the
Regent Warrants or in the number of shares purchasable upon exercise of the
Regent Warrants, then the exercise price of the Regent Warrants or such number
of shares will be adjusted upon issuance of the Regent Warrants to give effect
to the adjustment which would have been required as a result of such action.
The Regent Warrant Agreement may be amended or supplemented without the
consent of the holders of Regent Warrants to cure any ambiguity or to correct or
supplement any defective or inconsistent provision contained therein, or to make
such other necessary or desirable changes which shall not adversely affect the
interests of the warrant holders. Any other amendment to the Regent Warrant
Agreement shall require the consent of warrant holders representing not less
than 50% of the Regent Warrants then outstanding provided that no change in the
number or nature of the securities purchasable upon the exercise of any Regent
Warrant, or the Regent Price therefor, or the acceleration of the Regent
Expiration Date, and no change in the antidilution provisions which would
adversely affect the interests of the holders of Regent Warrants, shall be made
without the consent of the holder of such Regent Warrant, other than such
changes as are specifically prescribed by the Regent Warrant Agreement or are
made in compliance with applicable law.
No holder of Regent Warrants shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of Jacor Common Stock until the Regent
Warrants are properly exercised as provided in the Regent Warrant Agreement.
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REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Jacor Common Stock is ChaseMellon
Shareholder Services LLC.
DESCRIPTION OF OTHER JACOR INDEBTEDNESS
Jacor expects that the funds necessary to pay the Cash Consideration will be
obtained from a combination of one or more of the following sources: borrowings
under the Credit Facility, JCC's working capital, and proceeds from the 1997
Equity Offerings and 1997 8 3/4% Notes Offering. See "THE ACQUISITION--Financing
Arrangements." In addition to the Credit Facility, Jacor has the following debt
securities outstanding.
1996 10 1/8% NOTES
In June 1996, Jacor and JCAC, Inc., a Florida corporation ("JCAC") and
wholly-owned subsidiary of Jacor which was merged with and into Citicasters (now
known as JCC) in September 1996, consummated the sale by JCAC of $100.0 million
aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2006 (the
"1996 10 1/8% Notes"). JCAC loaned the net proceeds of the sale of the 1996
10 1/8% Notes (the "1996 10 1/8% Notes Offering") to Jacor in connection with
the financing for the Citicasters Merger. Upon the consummation of that merger,
the 1996 10 1/8% Notes became obligations of Citicasters.
The 1996 10 1/8% Notes will mature on June 15, 2006. The 1996 10 1/8% Notes
bear interest at the rate per annum of 10 1/8% from the date of issuance or from
the most recent interest payment date to which interest has been paid or
provided for, payable semi-annually on June 15 and December 15 of each year,
commencing December 15, 1996, to the persons in whose names such 1996 10 1/8%
Notes are registered at the close of business on the June 1 or December 1
immediately preceding such interest payment date. Interest will be calculated on
the basis of a 360-day year consisting of twelve 30-day months. The trustee
under the indenture for the 1996 10 1/8% Notes (the "1996 10 1/8% Note
Indenture") authenticated and delivered the Notes for original issue in an
aggregate principal amount of $100.0 million.
The 1996 10 1/8% Notes are not redeemable at JCC's option before June 15,
2001. Thereafter, the 1996 10 1/8% Notes are subject to redemption at the option
of JCC, at redemption prices declining from 105.063% of the principal amount for
the twelve months commencing June 15, 2001 to 100% on and after June 15, 2004,
plus in each case, accrued and unpaid interest thereon to the applicable
redemption date.
The 1996 10 1/8% Note Indenture contains certain covenants which impose
certain limitations and restrictions on the ability of JCC to incur additional
indebtedness, pay dividends or make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the proceeds thereof),
create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
If a change of control occurs, JCC is required to offer to repurchase all
outstanding 1996 10 1/8% Notes at a price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance that JCC will have sufficient funds to purchase all of
the 1996 10 1/8% Notes in the event of a change of control offer or that JCC
would be able to obtain financing for such purchase on favorable terms, if at
all. In addition, the Credit Facility restricts JCC's ability to repurchase the
1996 10 1/8% Notes, including pursuant to a change of control offer.
Furthermore, a change of control under the 1996 10 1/8% Note Indenture will
result in a default under the Credit Facility.
A Change of Control under the indenture governing the 1996 10 1/8% Notes
means any transaction or series of transactions in which any of the following
occurs: (i) any person or group (within the meaning of Rule 13d-3 under the
Exchange Act and Sections 13(d) and 14(d) of the Exchange Act), other than Zell/
Chilmark or any of its Affiliates, becomes the direct or indirect beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of (A) greater than 50%
of the total voting power (on a fully diluted basis as if all
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convertible securities had been converted) entitled to vote in the election of
directors of JCC, or the surviving person (if other than JCC), or (B) greater
than 20% of the total voting power (on a fully diluted basis as if all
convertible securities had been converted) entitled to vote in the election of
directors of JCC, or the surviving person (if other than JCC), and such person
or group has the ability to elect, directly or indirectly, a majority of the
members of the Board of Directors of JCC; or (ii) JCC consolidates with or
merges into another person, another person consolidates with or merges into JCC,
JCC issues shares of its Capital Stock or all or substantially all of the assets
of JCC are sold, assigned, conveyed, transferred, leased or otherwise disposed
of to any person as an entirety or substantially as an entirety in one
transaction or a series of related transactions and the effect of such
consolidation, merger, issuance or sale is as described in clause (i) above.
Events of default under the 1996 10 1/8% Note Indenture include various
events of default customary for such type of agreement, including the failure to
pay principal and interest when due on the Notes, cross defaults on other
indebtedness for borrowed monies in excess of $5.0 million (which indebtedness
therefore includes the Credit Facility, the LYONs (as defined herein), the 1996
9 3/4% Notes and the 1997 8 3/4% Notes) and certain events of bankruptcy,
insolvency and reorganization.
LIQUID YIELD OPTION-TM- NOTES
In June 1996, Jacor consummated the issuance and sale of Liquid Yield
Option-TM- Notes due June 12, 2011 (the "LYONs") in the aggregate principal
amount at maturity of $226.0 million (excluding $33.9 million aggregate
principal amount at maturity subject to the over-allotment option) (the "LYONs
Offering"). Each LYON had an Issue Price of $443.14 and has a principal amount
at maturity of $1,000.
Each LYON is convertible, at the option of the holder, at any time on or
prior to maturity, unless previously redeemed or otherwise purchased, into Jacor
Common Stock at a conversion rate of 13.412 shares per LYON. The conversion rate
will not be adjusted for accrued original issue discount, but is subject to
adjustment upon the occurrence of certain events affecting the Common Stock.
Upon conversion, the holder will not receive any cash payment representing
accrued original issue discount; such accrued original issue discount will be
deemed paid by the Common Stock received by the holder on conversion.
The LYONs are not redeemable by Jacor prior to June 12, 2001. Thereafter,
the LYONs are redeemable for cash at any time at the option of Jacor, in whole
or in part, at redemption prices equal to the issue price plus accrued original
issue discount to the date of redemption.
The LYONs will be purchased by Jacor, at the option of the holder, on June
12, 2001 and on June 12, 2005 for a Purchase Price of $581.25 and $762.39
(representing issue price plus accrued original issue discount to each date),
respectively, representing a 5.50% yield per annum to the holder on such date,
computed on a semiannual bond equivalent basis. Jacor, at its option, may elect
to pay the purchase price on any such purchase date in cash or Jacor Common
Stock, or any combination thereof. In addition, as of 35 business days after the
occurrence of a change in control of Jacor occurring on or prior to June 12,
2001, each LYON will be purchased for cash, by Jacor, at the option of the
holder, for a change in control purchase price equal to the issue price plus
accrued original issue discount to the change in control purchase date set for
such purchase. The change in control purchase feature of the LYONs may in
certain circumstances have an anti-takeover effect.
Under the indenture for the LYONs (the "LYONs Indenture"), a "Change in
Control" of Jacor is deemed to have occurred at such time as (i) any person (as
the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) other than Zell/Chilmark, Jacor, any subsidiary of Jacor, or any
employee benefit plan of either Jacor or any subsidiary of Jacor, files a
Schedule 13D or 14D-1 under the Exchange Act (or any successor schedule, form or
report) disclosing that such person has become the beneficial owner of 50% or
more of the Jacor Common Stock or other capital stock of Jacor into which such
Jacor Common Stock is reclassified or changed, with certain exceptions, or (ii)
there shall
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be consummated any consolidation or merger of Jacor (a) in which Jacor is not
the continuing or surviving corporation or (b) pursuant to which the Jacor
Common Stock would be converted into cash, securities or other property, in each
case, other than a consolidation or merger of Jacor in which the holders of
Jacor Common Stock immediately prior to the consolidation or merger own,
directly or indirectly, at least a majority of Jacor Common Stock of the
continuing or surviving corporation immediately after the consolidation or
merger. A Change of Control under the LYONs Indenture constitutes an event of
default under the Credit Facility.
The LYONs Indenture includes various events of default customary for such
type of agreement, such as cross defaults on other indebtedness for borrowed
monies in excess of $10.0 million (which indebtedness therefore includes the
Credit Facility, the 1996 10 1/8% Notes, the 1996 9 3/4% Notes and the 1997
8 3/4% Notes) and certain events of bankruptcy, insolvency and reorganization.
1996 9 3/4% NOTES
In December 1996, JCC conducted an offering (the "1996 9 3/4% Notes
Offering") whereby JCC issued and sold 9 3/4% Senior Subordinated Notes due 2006
(the "1996 9 3/4% Notes") in an aggregate principal amount of $170.0 million.
The 1996 9 3/4% Notes have interest payment dates of June 15 and December 15,
commencing on June 15, 1997, and mature on December 15, 2006.
The 1996 9 3/4% Note Indenture contains certain covenants which impose
certain limitations and restrictions on the ability of Jacor to incur additional
indebtedness, pay dividends or make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the proceeds thereof),
create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
If a change of control occurs, JCC will be required to offer to repurchase
all outstanding 1996 9 3/4% Notes at a price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance that JCC will have sufficient funds to purchase all of
the 1996 9 3/4% Notes in the event of a change of control offer or that JCC
would be able to obtain financing for such purpose on favorable terms, if at
all. In addition, the Credit Facility restricts JCC's ability to repurchase the
1996 9 3/4% Notes, including pursuant to a change of control offer. Furthermore,
a change of control under the 1996 9 3/4% Note Indenture will result in a
default under the Credit Facility.
As used herein, a "Change of Control" means (i) any merger or consolidation
of JCC with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of any of the assets of
JCC, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s), any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) (other than an Excluded
Person) is or becomes the "beneficial owner," directly or indirectly, of more
than 50% of the total voting power in the aggregate normally entitled to vote in
the election of directors, managers, or trustees, as applicable, of the
transferee(s) or surviving entity or entities, (ii) any "person" or "group" (as
such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act, whether or not applicable) (other than an Excluded Person) is or becomes
the "beneficial owner," directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock of JCC then
outstanding normally entitled to vote in elections of directors, or (iii) during
any period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of JCC
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of JCC was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of JCC then in office.
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The events of default under the 1996 9 3/4% Note Indenture include various
events of default customary for such type of agreement, including the failure to
pay principal and interest when due on the 1996 9 3/4% Notes, cross defaults on
other indebtedness for borrowed monies in excess of $5.0 million (which
indebtedness would therefore include the Credit Facility, the LYONs, the 1996
10 1/8% Notes and the 1997 8 3/4% Notes) and certain events of bankruptcy,
insolvency and reorganization.
1997 8 3/4% NOTES
In June, 1997, JCC conducted an offering (the "1997 8 3/4% Notes Offering")
whereby JCC issued and sold 8 3/4% Senior Subordinated Notes due 2007 (the "1997
8 3/4% Notes) in an aggregate principal amount of approximately $150 million.
The 1997 8 3/4% Notes have interest payments dates of June 15 and December 15,
commencing on December 15, 1997, and mature June 15, 2007.
The 1997 8 3/4% Note Indenture contains certain covenants which impose
certain limitations and restrictions on the ability of Jacor to incur additional
indebtedness, pay dividends or make other distributions, make certain loans and
investments, apply the proceeds of asset sales (and use the proceeds thereof),
create liens, enter into certain transactions with affiliates, merge,
consolidate or transfer substantially all its assets and make investments in
unrestricted subsidiaries.
If a change of control occurs, JCC will be required to offer to repurchase
all outstanding 1997 8 3/4% Notes at a price equal to 101% of their principal
amount, plus accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance that JCC will have sufficient funds to purchase all of
the 1997 8 3/4% Notes in the event of a change of control offer or that JCC
would be able to obtain financing for such purpose on favorable terms, if at
all. In addition, the Credit Facility restricts JCC's ability to repurchase the
1997 8 3/4% Notes, including pursuant to a change of control offer. Furthermore,
a change of control under the 1997 8 3/4% Note Indenture will result in a
default under the Credit Facility.
As used herein, a "Change of Control" means (i) any merger or consolidation
of JCC with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of any of the assets of
JCC, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s), any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable) (other than an Excluded
Person) is or becomes the "beneficial owner," directly or indirectly, of more
than 50% of the total voting power in the aggregate normally entitled to vote in
the election of directors, managers, or trustees, as applicable, of the
transferee(s) or surviving entity or entities, (ii) any "person"or "group" (as
such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act, whether or not applicable) (other than an Excluded Person) is or becomes
the "beneficial owner," directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock of JCC then
outstanding normally entitled to vote in elections of directors, or (iii) during
any period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of JCC
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of JCC was approved by a vote of
majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of JCC then in office.
The events of default under the 1997 8 3/4% Note Indenture include various
events of default customary for such type of agreement, including the failure to
pay principal and interest when due on the 1997 8 3/4% Notes, cross defaults on
other indebtedness for borrowed monies in excess of $5.0 million (which
indebtedness would therefore include the Credit Facility, the LYONs, the 1996
10 1/8% Notes and the 1996 9 3/4% Notes) and certain events of bankruptcy,
insolvency and reorganization.
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LEGAL MATTERS
The legality of the Jacor Common Stock to be issued in connection with the
Acquisition is being passed upon for Jacor by Graydon, Head & Ritchey,
Cincinnati, Ohio.
EXPERTS
The consolidated balance sheets of Jacor Communications, Inc. and
Subsidiaries as of December 31, 1996 and 1995 and the consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996 and the combined balance sheets of EFM Media
Management, Inc., EFM Publishing, Inc. and PAM Media, Inc. (the "Combined EFM
Companies") as of December 31, 1995 and 1996 and related combined statements of
operations, changes in retained earnings and cash flows for the years ended
December 31, 1994, 1995 and 1996, included in this Prospectus/ Information
Statement, have been included herein in reliance on the report of Coopers &
Lybrand, L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated financial statements of Premiere Radio Networks, Inc. at
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, appearing in the Prospectus/ Information Statement and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The combined balance sheet of WLTF/WTAM, Cleveland as of December 31, 1996,
and the related combined statements of operations and cash flows for the year
then ended, included in this registration statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
AUDITED--
Report of Independent Accountants........................................................................ F-2
Consolidated Balance Sheets at December 31, 1995 and 1996................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996............... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1994, 1995 and 1996..... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996............... F-6
Notes to Consolidated Financial Statements............................................................... F-7
UNAUDITED--
Condensed Consolidated Balance Sheets at December 31, 1996 and March 31, 1997............................ F-21
Condensed Consolidated Statements of Operations for the three months ended March 31, 1996 and 1997....... F-22
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and 1997....... F-23
Notes to Condensed Consolidated Financial Statements..................................................... F-24
COMBINED EFM COMPANIES
Report of Independent Auditors........................................................................... F-28
Combined Balance Sheets as of December 31, 1995 and 1996................................................. F-29
Combined Statements of Operations for the years ended December 31, 1994, 1995 and 1996................... F-30
Combined Statements of Changes in Retained Earnings for the years ended December 31, 1994, 1995 and
1996................................................................................................... F-31
Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996................... F-32
Notes to Financial Statements............................................................................ F-33
PREMIERE RADIO NETWORKS, INC.
Report of Independent Auditors........................................................................... F-37
Consolidated Balance Sheets at December 31, 1996 and 1995................................................ F-38
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994................... F-40
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994..... F-41
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994............... F-42
Notes to Consolidated Financial Statements............................................................... F-43
THE STATIONS
Report of Independent Accountants........................................................................ F-59
Combined Balance Sheets as of December 31, 1996 and March 31, 1997 (unaudited)........................... F-60
Combined Statements of Operations for the years ended December 31, 1995 (unaudited) and 1996 and the
three month period ended March 31, 1996 and 1997 (unaudited)........................................... F-61
Combined Statements of Cash Flows for the years ended December 31, 1995 (unaudited) and 1996 and the
three month period ended March 31, 1996 and 1997 (unaudited)........................................... F-62
Notes to Combined Financial Statements................................................................... F-63
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
We have audited the accompanying consolidated balance sheets of Jacor
Communications, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jacor
Communications, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
February 27, 1997
F-2
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................. $ 78,137 $ 7,437
Accounts receivable, less allowance for doubtful accounts of $3,950 in 1996 and $1,606
in 1995............................................................................. 79,502 25,262
Prepaid expenses and other current assets............................................. 8,963 3,916
------------ ----------
Total current assets................................................................ 166,602 36,615
Property and equipment, net............................................................. 131,488 30,801
Intangible assets, net.................................................................. 1,290,172 127,158
Other assets............................................................................ 116,680 14,265
------------ ----------
Total assets...................................................................... $ 1,704,942 $ 208,839
------------ ----------
------------ ----------
<CAPTION>
LIABILITIES
<S> <C> <C>
Current liabilities:
Accounts payable...................................................................... $ 12,600 $ 2,313
Accrued expenses and other current liabilities........................................ 30,774 3,463
Accrued payroll....................................................................... 7,562 3,178
Accrued federal, state and local income tax........................................... 4,596 3,226
------------ ----------
Total current liabilities........................................................... 55,532 12,180
Long-term debt.......................................................................... 670,000 45,500
5 1/2% Liquid Yield Option Notes........................................................ 118,682 --
Other liabilities....................................................................... 108,914 3,469
Deferred tax liability.................................................................. 264,878 8,617
Commitments and contingencies
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Preferred Stock, authorized and unissued 4,000,000 shares............................... -- --
Common Stock, no par value, $0.01 per share stated value; authorized 100,000,000 shares,
issued and outstanding shares:
31,287,221 in 1996 and 18,157,209 in 1995............................................. 313 182
Additional paid-in capital.............................................................. 432,721 118,248
Common stock warrants................................................................... 26,500 388
Unrealized gain on investments.......................................................... 2,042 --
Retained earnings....................................................................... 25,360 20,255
------------ ----------
Total shareholders' equity.......................................................... 486,936 139,073
------------ ----------
Total liabilities and shareholders' equity........................................ $ 1,704,942 $ 208,839
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Broadcast revenue............................................................ $ 250,461 $ 133,103 $ 119,635
Less agency commissions.................................................... 26,700 14,212 12,625
---------- ---------- ----------
Net revenue.............................................................. 223,761 118,891 107,010
Broadcast operating expenses................................................. 151,065 87,290 80,468
Depreciation and amortization................................................ 23,404 9,483 9,698
Corporate general and administrative expenses................................ 7,629 3,501 3,361
Special bonuses.............................................................. 2,303 -- --
---------- ---------- ----------
Operating income......................................................... 39,360 18,617 13,483
Interest expense............................................................. (32,244) (1,444) (534)
Gain on sale of radio stations............................................... 2,539 -- --
Other income, net............................................................ 5,716 1,092 1,216
---------- ---------- ----------
Income before income taxes and extraordinary loss........................ 15,371 18,265 14,165
Income tax expense........................................................... (7,300) (7,300) (6,313)
---------- ---------- ----------
Income before extraordinary loss........................................... 8,071 10,965 7,852
Extraordinary loss, net of income tax benefit................................ (2,966) -- --
---------- ---------- ----------
Net income............................................................... $ 5,105 $ 10,965 $ 7,852
---------- ---------- ----------
---------- ---------- ----------
Net Income Per Common Share:
Before extraordinary loss.................................................. $ 0.30 $ 0.52 $ 0.37
Extraordinary loss......................................................... (0.11) -- --
---------- ---------- ----------
Net income per common share.............................................. $ 0.19 $ 0.52 $ 0.37
---------- ---------- ----------
---------- ---------- ----------
Number of common shares used in per share calculation........................ 26,830 20,913 21,409
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ADDITIONAL COMMON UNREALIZED
STATED PAID-IN STOCK GAIN ON RETAINED
SHARES VALUE CAPITAL WARRANTS INVESTMENTS EARNINGS TOTAL
--------- ----------- ---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994....................... 19,500 $ 195 $ 138,390 $ 390 $ -- $ 1,438 $ 140,413
Exercise of stock options....................... 89 1 768 -- -- -- 769
Other........................................... 1 -- 10 -- -- -- 10
Net income...................................... -- -- -- -- -- 7,852 7,852
--------- ----- ---------- --------- ----------- --------- ----------
Balances, December 31, 1994..................... 19,590 196 139,168 390 -- 9,290 149,044
Purchase and retirement of stock................ (1,515) (15) (21,679) -- -- -- (21,694)
Purchase of stock by employee stock purchase
plan.......................................... 44 1 474 -- -- -- 475
Exercise of stock options....................... 28 -- 195 -- -- -- 195
Other........................................... 10 -- 90 (2) -- -- 88
Net income...................................... -- -- -- -- -- 10,965 10,965
--------- ----- ---------- --------- ----------- --------- ----------
Balances, December 31, 1995..................... 18,157 182 118,248 388 -- 20,255 139,073
Common stock offering........................... 11,250 113 301,636 -- -- -- 301,749
Purchase of stock by employee stock purchase
plan.......................................... 48 -- 672 -- -- -- 672
Exercise of stock options....................... 106 1 650 -- -- -- 651
Conversion of warrants.......................... 1,726 17 14,704 (374) -- -- 14,347
Purchase of warrants............................ -- -- (5,080) (14) -- -- (5,094)
Issuance of warrants............................ -- -- -- 26,500 -- -- 26,500
Unrealized gain on investments.................. -- -- -- -- 2,042 -- 2,042
Stock related compensation...................... -- -- 1,891 -- -- -- 1,891
Net income...................................... -- -- -- -- -- 5,105 5,105
--------- ----- ---------- --------- ----------- --------- ----------
Balances, December 31, 1996..................... 31,287 $ 313 $ 432,721 $ 26,500 $ 2,042 $ 25,360 $ 486,396
--------- ----- ---------- --------- ----------- --------- ----------
--------- ----- ---------- --------- ----------- --------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................................................... $ 5,105 $ 10,965 $ 7,852
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation..................................................................... 7,661 3,251 2,507
Amortization of intangible assets................................................ 15,743 6,232 7,191
Extraordinary loss............................................................... 2,966 -- --
Non-cash interest expense........................................................ 4,327 -- --
Provision for losses on accounts and notes receivable............................ 978 1,137 1,442
Deferred income tax benefit...................................................... (233) (560) (355)
Gain on sale of radio stations................................................... (2,539) -- --
Other............................................................................ 892 237 (478)
Changes in operating assets and liabilities, net of effects of acquisitions and
disposals:
Accounts receivable............................................................ (18,626) (2,344) (5,766)
Other current assets........................................................... (4,076) 1,029 (2,008)
Accounts payable............................................................... 10,054 (424) 372
Accrued expenses and other liabilities......................................... 2,655 1,102 591
--------- --------- ---------
Net cash provided by operating activities............................................ 24,907 20,625 11,348
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures............................................................... (11,852) (4,969) (2,221)
Cash paid for acquisitions......................................................... (826,302) (34,008) (4,904)
Deposits on broadcast stations..................................................... (23,608) -- --
Purchase of intangible assets...................................................... -- (15,536) (6,262)
Proceeds from sale of assets....................................................... 6,595 -- 1,919
Loans originated and other......................................................... (4,097) (9,827) (2,182)
--------- --------- ---------
Net cash used by investing activities................................................ (859,264) (64,340) (13,650)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt........................................... 973,000 45,500 --
Proceeds from the issuance of LYONs................................................ 115,172 -- --
Purchase of common stock........................................................... -- (21,694) --
Proceeds from issuance of common stock............................................. 316,726 758 779
Repayment of long-term debt........................................................ (471,600) -- --
Payment of financing costs......................................................... (27,435) -- --
Other.............................................................................. (806) (387) (120)
--------- --------- ---------
Net cash provided by financing activities............................................ 905,057 24,177 659
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 70,700 (19,538) (1,643)
Cash and cash equivalents at beginning of year....................................... 7,437 26,975 28,618
--------- --------- ---------
Cash and cash equivalents at end of year............................................. $ 78,137 $ 7,437 $ 26,975
--------- --------- ---------
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest......................................................................... $ 5,300 $ 1,400 $ --
Income taxes..................................................................... $ 4,992 $ 6,662 $ 5,545
Supplemental schedule of non-cash investing and financing activities:
Fair value of assets exchanged..................................................... $ 170,000 -- --
Liabilities assumed in acquisitions................................................ $ 296,187 -- --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS
As of December 31, 1996 the Company owned and/or operated 85 radio stations
and one television station in 21 broadcast areas throughout the United States.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Jacor Communications, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
REVENUES
Revenues for commercial broadcasting advertisements are recognized when the
commercial is broadcast.
BARTER TRANSACTIONS
Revenue from barter transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast, and
merchandise or services received are charged to expense when received or used.
If merchandise or services are received prior to the broadcast of the
advertising, a liability (deferred barter revenue) is recorded. If the
advertising is broadcast before the receipt of the goods or services, a
receivable is recorded.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less, when purchased, to be cash equivalents. The effect of barter
transactions has been eliminated.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and accounts receivable. Concentrations of credit risk with respect to accounts
receivable are limited due to the large number of customers comprising the
Company's customer base and their dispersion across many different geographic
areas of the country.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation;
depreciation is provided on the straight-line basis over the estimated useful
lives of the assets as follows:
<TABLE>
<S> <C>
Land improvements.................................... 20 Years
Buildings............................................ 25 Years
Equipment............................................ 3 to 20 Years
Furniture and fixtures............................... 5 to 12 Years
Leasehold improvements............................... Life of lease
</TABLE>
F-7
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are stated at cost less accumulated amortization;
amortization is provided principally on the straight-line basis over the
following lives:
<TABLE>
<S> <C>
Broadcasting licenses and goodwill................... 40 Years
Other intangibles.................................... 5 to 25 Years
</TABLE>
Other intangible assets consist primarily of various contracts and purchased
intellectual property.
The carrying value of intangible assets is reviewed by the Company when
events or circumstances suggest that the recoverability of an asset may be
impaired. If this review indicates that goodwill and licenses will not be
recoverable, as determined based on the undiscounted cash flows of the entity
over the remaining amortization period, the carrying value of the goodwill and
licenses will be reduced accordingly.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's publicly traded debt is based on quoted
market prices. It was not practicable to estimate the fair value of borrowings
under the Company's Credit Facility since there is no liquid market for this
debt.
MARKETABLE EQUITY SECURITIES
Marketable equity securities are classified as available for sale and
included in other assets.
PER SHARE DATA
Income per share for the three years ended December 31, 1996 is based on the
weighted average number of common shares outstanding and gives effect to both
dilutive stock options and dilutive stock purchase warrants during the year.
Fully diluted income per share is not presented since it approximates income per
share.
2. ACQUISITIONS
COMPLETED ACQUISITIONS
In August 1995, the Company acquired certain operating assets of radio
stations WDUV-FM and WBRD-AM in Tampa, Florida for approximately $14 million in
cash.
In 1995, the Company acquired the call letters, programming and certain
contracts of radio station WOFX-FM in Cincinnati, Ohio and then changed the call
letters of its FM broadcast station WPPT to
F-8
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
WOFX. The Company also acquired radio stations WSOL-FM (formerly WHJX), WJBT-FM
and WZAZ-AM in Jacksonville, Florida. The aggregate cash purchase price for
these acquisitions was approximately $9.75 million.
During 1996, the Company acquired Noble Broadcast Group, Inc. ("Noble"), for
approximately $152 million in cash plus related costs and expenses. Noble's San
Diego operations, which provided programming to and sold the air time for two
radio stations serving San Diego (one AM, one FM) were acquired in February
1996. Ten radio stations owned by Noble, serving Denver (two AM and two FM), St.
Louis (one AM, two FM) and Toledo (one AM, two FM) were acquired on July 15,
1996.
In September 1996, the Company acquired Citicasters Inc. ("Citicasters") for
an approximate aggregate value of $801.2 million, which included the purchase of
all outstanding shares of Citicasters common stock, the assumption of
Citicasters outstanding indebtedness and the issuance of warrants to purchase an
aggregate of 4,400,000 shares of common stock. Each Citicasters Warrant is
exercisable for .2035247 of a share of the Company's common stock at an exercise
price of $28.00 per full share. Citicasters owned and/or operated 19 radio
stations, located in Atlanta, Phoenix, Tampa, Portland, Kansas City, Cincinnati,
Sacramento, Columbus and two television stations, one located in Tampa and one
in Cincinnati.
In June 1996, the Company acquired the FCC licenses of WCTQ-FM and WAMR-AM
in Venice, Florida and certain real estate and transmission facilities necessary
to operate the stations for a purchase price of approximately $4.4 million in
cash.
In August 1996, the Company acquired the FCC licenses of WLAP-AM, WMXL-FM
and WWYC-FM in Lexington, Kentucky and certain real estate and transmission
facilities necessary to operate the stations for a purchase price of
approximately $14 million in cash.
In June 1996, the Company financed the purchase by Critical Mass Media, Inc.
("CMM") of a 40% interest in a newly formed limited liability company which
purchased for $540,000 the assets of Duncan American Radio, Inc. CMM is a
marketing research and radio consulting business which is owned by a limited
partnership of which the Company is the 5% general partner and a corporation
wholly owned by the Chief Executive Officer of the Company, is the 95% limited
partner.
In December 1996, the Company exchanged Tampa television station, WTSP-TV,
acquired by the Company in the Citicasters Merger, for six radio stations owned
by Gannett. The stations the Company acquired are KIIS-FM and KIIS-AM in Los
Angeles, KSDO-AM and KKBH-FM in San Diego and WAKS-FM and WDAE-AM in Tampa-St.
Petersburg.
In December 1996, the Company purchased from Clear Channel Radio, Inc. radio
stations KTWO-AM, KMGW-FM and the Wyoming Radio Network in Casper, Wyoming for a
purchase price of $1.9 million.
All of the above acquisitions have been accounted for as purchases. The
excess cost over the fair value of net assets acquired is being amortized over
40 years. The results of operations of the acquired businesses are included in
the Company's financial statements since the respective dates of acquisition.
Assuming
F-9
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
each of the 1995 and 1996 acquisitions had taken place at the beginning of 1995,
unaudited pro forma consolidated results of operations would have been as
follows:
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
YEAR ENDED DECEMBER
31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Net revenue....................................................... $ 342,649 $ 314,830
Net loss.......................................................... (8,131) (7,944)
Net loss per common share............................................. $(0.26) $(0.25)
</TABLE>
ACQUISITIONS PENDING AS OF DECEMBER 31, 1996
In May 1996, Jacor entered into an agreement with Enterprise Media of
Toledo, L.P. to acquire the FCC licenses of WIOT-FM and WCWA-AM in Toledo, Ohio
and to purchase real estate and transmission facilities necessary to operate the
stations. The purchase price for the assets is $13.0 million which amount has
been placed in escrow pending the closing of the transaction.
In October 1996, the Company entered into a definitive merger agreement with
Regent whereby Regent will merge with and into the Company. Regent owned,
operated or represented 19 radio stations located in Kansas City, Salt Lake
City, Las Vegas, Louisville and Charleston. During February 1997, the Company
consummated the Regent merger for the approximate aggregate value of $185
million, which included (i) the issuance of 3.55 million shares of Jacor common
stock valued at $105.9 million, (ii) the issuance of warrants to acquire 500,000
shares of the Company's common stock at $40 per share valued at $5 million and
(iii) the assumption of approximately $6 million of debt and other liabilities
and $68 million in cash.
Also in October 1996, Jacor entered into a binding agreement with Colfax
Communications, Inc. ("Colfax") to acquire KIDO-AM and KLTB-FM in Boise, Idaho
and KARO-FM in Caldwell, Idaho for a purchase price of $11.0 million in cash.
Jacor and Colfax consummated the transaction in January 1997.
Additionally in October 1996, Jacor entered into a binding agreement with
Palmer Broadcasting Limited Partnership whereby Jacor would acquire the FCC
licenses and assets of WHO-AM and KLYF-FM in Des Moines and WMT-AM and WMT-FM in
Cedar Rapids for a purchase price of $52.5 million in cash. The Company
consummated this transaction in March 1997.
The Company also has acquisitions pending in the following broadcast areas:
(i) Sarasota, Florida, (ii) San Diego, California, (iii) Circleville, Marysville
and Lima, Ohio, (iv) Lexington and Louisville, Kentucky, (v) Ft. Collins and
Greely, Colorado, (vi) Rochester, New York, (vii) Santa Barbara, California, and
(viii) Portland, Oregon. The net cash to be paid for the acquisitions pending as
of December 31, 1996 after giving effect to escrow deposits of $33.3 million,
totals approximately $230 million.
F-10
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Land and land improvements............................................. $ 14,269 $ 2,575
Buildings.............................................................. 20,249 2,585
Equipment.............................................................. 97,491 26,674
Furniture and fixtures................................................. 7,524 3,505
Leasehold improvements................................................. 5,872 3,185
---------- ---------
145,405 38,524
Less accumulated depreciation.......................................... (13,917) (7,723)
---------- ---------
$ 131,488 $ 30,801
---------- ---------
---------- ---------
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1995 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Broadcasting licenses and goodwill.................................. $ 1,277,364 $ 120,948
Other intangible assets............................................. 47,962 27,489
------------ ----------
1,325,326 148,437
Less accumulated amortization....................................... (35,154) (21,279)
------------ ----------
$ 1,290,172 $ 127,158
------------ ----------
------------ ----------
</TABLE>
5. OTHER ASSETS
The Company's other assets at December 31, 1996 and December 31, 1995
consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
News Corp Warrants............................................... $ 39,800 $ --
Acquisition escrows.............................................. 30,804 --
Marketable securities............................................ 13,965 --
Other............................................................ 32,111 14,265
------------ ------------
$ 116,680 $ 14,265
------------ ------------
------------ ------------
</TABLE>
The News Corp Warrants were included in the Citicasters acquisition. The
Company sold the News Corp Warrants in February 1997 for $44.5 million in cash
and will record a pretax gain of $4.7 million in the first quarter of 1997.
F-11
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT
The Company's debt obligations at December 31, 1996 and 1995 consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Credit facility borrowings............................................. $ 400,000 $ 45,500
10 1/8% Senior Subordinated Notes, due 2006............................ 100,000 --
9 3/4% Notes, due 2006................................................. 170,000 --
---------- ---------
$ 670,000 $ 45,500
---------- ---------
---------- ---------
</TABLE>
NEW CREDIT FACILITY
In June 1996, the Company entered into a new credit facility (the "Credit
Facility"). The Credit Facility is with a syndicate of banks and other financial
institutions. In February 1997, the Credit Facility was amended and restated to
expand the availability to $750 million of loans in three components: (i) a
revolving credit facility of up to $450 million with a mandatory commitment
reduction of $27.5 million on June 12, 1999 continuing semi-annually through
June 2002, and a final maturity date of June 12, 2003; (ii) a term loan of up to
$200 million with a scheduled reduction of $8.5 million on December 12, 1997
with increasing semi-annual reductions thereafter and a final maturity date of
June 12, 2003; and (iii) a term loan of up to $100 million with a scheduled
reduction of $.5 million on December 12, 1998 with increasing semi-annual
reductions thereafter and a final maturity date of June 12, 2004.
Borrowings under the Credit Facility bear interest at rates that fluctuate
with a bank base rate and/or the Eurodollar rate. The weighted average interest
rate at December 31, 1996 was 7.83%.
Loans under the Credit Facility are guaranteed by the Company and each of
the Company's direct and indirect subsidiaries. The Company's obligations with
respect to the Credit Facility and each guarantor's obligations with respect to
the related guaranty is collateralized by substantially all of their respective
assets, and, in the case of the Company's subsidiaries, capital stock.
The Credit Facility contains covenants and provisions that restrict, among
other things, the Company's ability to: (i) incur additional indebtedness; (ii)
incur liens on its property; (iii) make investments and advances; (iv) enter
into guarantees and other contingent obligations; (v) merge or consolidate with
or acquire another person or engage in other fundamental changes; (vi) engage in
certain sales of assets; (vii) make capital expenditures; (viii) enter into
leases; (ix) engage in certain transactions with affiliates; and (x) make
restricted junior payments. The Credit Facility also requires satisfaction of
certain financial performance criteria (including a consolidated interest
coverage ratio, a leverage-to-operating cash flow ratio and a consolidated
operating cash flow available for fixed charges ratio) and the repayment of
loans under the Credit Facility with proceeds of certain sales of assets and
debt issuances, and with 50% of the Company's Consolidated Excess Cash Flow (as
defined in the Credit Facility).
During 1996 the Company recognized an extraordinary loss of approximately $3
million related to the write off of debt financing costs. Also, in the first
quarter of 1997, the Company recognized an extraordinary loss of approximately
$5.8 million related to the write off of debt financing costs.
F-12
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
10 1/8% SENIOR SUBORDINATED NOTES DUE 2006
In June 1996, the Company completed an offering of $100 million of its
10 1/8% Senior Subordinated Notes (the "Notes"). The Notes will mature on June
15, 2006. Interest on the Notes is payable semi-annually on June 15 and December
15 of each year, commencing December 15, 1996. The Notes will be redeemable at
the option of the Company, in whole or in part, at any time on or after June 15,
2001. The redemption prices commence at 105.063% and are reduced by 1.688%
annually until June 15, 2004 when the redemption price is 100%. At December 31,
1996 the market value of the Notes exceeded carrying value by approximately $3
million.
9 3/4% NOTES DUE 2006
In December 1996, the Company completed an offering of $170 million of its
9 3/4% Notes (the "9 3/4% Notes"). The 9 3/4% Notes will mature on December 15,
2006. Interest on the 9 3/4% Notes is payable semi-annually on June 15 and
December 15 of each year, commencing on June 15, 1997. The 9 3/4% Notes will be
redeemable at the option of the Company, in whole or part, at any time on or
after December 15, 2001. The redemption prices commence at 104.875% and are
reduced by 1.625% annually until December 15, 2004 when the redemption price is
100%. At December 31, 1996, the market value of the 9 3/4% Notes exceeded
carrying value by approximately $3.4 million.
The Notes and the 9 3/4% Notes were issued by JCAC, Inc., a wholly owned
subsidiary formed for the purpose of completing the merger of Citicasters Inc.,
the predecessor to Jacor Communications Company ("JCC"), and are jointly and
severally, fully and unconditionally guaranteed on a senior subordinated basis
by Jacor and substantially all subsidiaries of Jacor (the "Subsidiary
Guarantors"). JCC (the successor to JCAC, Inc.) and each of the Subsidiary
Guarantors are wholly owned direct or indirect subsidiaries of Jacor. Separate
financial statements of JCC and each of the Subsidiary Guarantors are not
presented because Jacor believes that such information would not be material to
investors. The direct and indirect non-guarantor subsidiaries of Jacor are
inconsequential, both individually and in the aggregate.
In addition, Jacor and JCC have a pending registration statement on Form S-3
(File No. 333-19291) for up to $250 million of debt securities that would be
jointly and severally, fully and unconditionally guaranteed on a senior
subordinated basis by Jacor and each of the Subsidiary Guarantors if such debt
securities are issued by JCC and by JCC and each of the Subsidiary Guarantors if
such debt securities are issued by Jacor.
Summarized financial information with respect to Jacor and with respect to
the Subsidiary Guarantors on a combined basis as of December 31, 1996 and 1995
and for each of the three years in the period ended
F-13
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
December 31, 1996; and with respect to JCC as of December 31, 1996 and for the
period from June 6, 1996 to December 31, 1996 is as follows:
<TABLE>
<CAPTION>
JACOR JJC COMBINED SUBSIDIARY GUARANTORS
--------------------------------- ------------ ------------------------------------
1996 1995 1994 1996 1996 1995 1994
---------- ---------- --------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Statement Data (in
thousands):
Net revenue.......................... -- -- -- -- $ 223,761 $ 118,891 $ 107,010
Equity in earnings of
subsidiaries....................... $ 10,237 $ 10,965 $ 7,852 $ 11,864 -- -- --
Operating income..................... 305 10,965 7,852 11,864 49,292 18,617 13,483
Income before extraordinary items.... 5,105 10,965 7,852 13,203 11,864 18,617 13,483
Net income........................... 5,105 10,965 7,852 10,237 11,864 10,965 7,852
Balance Sheet Data (in thousands):
Current assets....................... $ 1,538 $ 6,802 $ 75,626 $ 166,602 $ 36,615
Non-current assets................... 722,918 186,589 1,264,081 1,538,340 172,224
Current liabilities.................. 16,253 160 9,975 55,532 12,180
Non-Current liabilities.............. 221,267 54,158 1,056,348 1,162,474 57,586
Shareholders equity.................. 486,936 139,073 273,384 486,936 139,073
</TABLE>
7. LIQUID YIELD OPTION NOTES
In June 1996, the Company issued 5 1/2% Liquid Yield Option Notes ("LYONs")
due 2011 in the aggregate principal amount at maturity of $259.9 million. Each
LYON had an issue price of $443.14 and a principal amount at maturity of $1,000.
At December 31, 1996 the accreted value of the LYONs was $118.7 million which
included $3.5 million of interest accreted during 1996.
Each LYON is convertible, at the option of the holder, at any time on or
prior to maturity, into Common Stock at a conversion rate of 13.412 shares per
LYON.
The LYONs are not redeemable by the Company prior to June 12, 2001.
Thereafter, the LYONs are redeemable for cash at any time at the option of the
Company, in whole or in part, at redemption prices equal to the issue price plus
accrued original issue discount to the date of redemption.
The LYONs will be purchased by the Company, at the option of the holder, on
June 12, 2001 and June 12, 2006, for a Purchase Price of $581.25 and $762.39
(representing issue price plus accrued original issue discount to each date),
respectively, representing a 5 1/2% yield per annum to the holder on such date.
The Company, at its option, may elect to pay the purchase price on any such
purchase date in cash or common stock, or any combination thereof.
At December 31, 1996 the market value of the LYONs was less than the
carrying value by approximately $3 million.
F-14
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK
WARRANTS
In connection with a Stock Offering during 1996, the Company determined that
it would convert the 1,983,605 outstanding 1993 Warrants into the right to
receive the Fair Market Value (as defined) calculated to be $19.70 per Warrant.
Prior to the conversion, the Company issued 1,726,004 shares of Common Stock
with proceeds aggregating approximately $14.3 million upon exercise of such
warrants by the holders. The Company used approximately $5.1 million of these
proceeds to fund the conversion of the remaining 1993 Warrants presented for
redemption.
9. STOCK BASED COMPENSATION PLANS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company has elected not to adopt the cost
recognition provisions of SFAS 123 as permitted by the statement. The Company
continues to apply APB Opinion No. 25 in accounting for its stock based
compensation plans.
1993 STOCK OPTION PLAN
Under the Company's 1993 stock option plan, options to acquire up to
2,769,218 shares of common stock can be granted to directors, officers and key
employees at no less than the fair market value of the underlying stock on the
date of grant. The plan permits the granting of non-qualified stock options as
well as incentive stock options. Between 25% and 30% of the options vest on the
date of grant and between 20% and 30% vest on each of the next three
anniversaries of the grant date. Options expire 10 years after
F-15
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK BASED COMPENSATION PLANS (CONTINUED)
grant and the plan will terminate no later than February 7, 2003. Information
pertaining to the plan for the years ended December 31, 1994, 1995 and 1996 is
as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- -----------------
<S> <C> <C>
1994:
Outstanding at beginning of year....................................... 1,405,620 $ 6.06
Granted................................................................ 35,000 $ 14.22
Exercised.............................................................. (89,310) $ 5.81
Outstanding at end of year............................................. 1,351,310 $ 6.16
Exercisable at end of year............................................. 766,170 $ 5.90
Available for grant at end of year..................................... 87,618
1995:
Outstanding at beginning of year....................................... 1,351,310 $ 6.16
Granted................................................................ 245,000 $ 14.61
Exercised.............................................................. (27,790) $ 5.81
Outstanding at end of year............................................. 1,568,520 $ 7.52
Exercisable at end of year............................................. 1,093,340 $ 6.57
Available for grant at end of year..................................... 1,092,618
1996:
Outstanding at beginning of year....................................... 1,568,520 $ 7.52
Granted................................................................ 594,500 $ 23.63
Exercised.............................................................. (106,410) $ 6.10
Outstanding at end of year............................................. 2,056,610 $ 12.26
Exercisable at end of year............................................. 1,507,000 $ 8.68
Available for grant at end of year..................................... 523,118
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions for grants in 1995 and 1996, respectively: risk-free interest rates
are different for each grant and range from 5.24% to 6.45%; the expected lives
of options are 5 years; and volatility of 35.1% for all grants. A summary of the
fair value of options granted in 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Weighted-average fair value of options granted at-the-money............................ $ 9.42 $ 5.70
Weighted-average fair value of options granted at a premium............................ $ 8.46 $ 5.33
Weighted-average fair value of all options granted during the year..................... $ 9.07 $ 5.44
</TABLE>
F-16
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK BASED COMPENSATION PLANS (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING -----------------------------
- --------------------------------------------------------------------------- NUMBER
NUMBER EXERCISABLE
RANGE OF EXERCISE OUTSTANDING WEIGHTED AVERAGE WEIGHTED AVERAGE AT WEIGHTED AVERAGE
PRICES AT 12/31/96 REMAINING LIFE EXERCISE PRICE 12/31/96 EXERCISE PRICE
- ---------------------- ----------- ------------------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
$ 5.74 to $ 6.46 1,182,110 6.16 $ 6.08 1,182,110 $ 6.08
$12.75 to $19.40 305,000 8.34 $ 14.60 182,500 $ 13.96
$21.25 to $28.74 569,500 9.76 $ 23.63 142,390 $ 23.63
- ---------------------- ----------- --- ------ ---------- ------
$ 5.74 to $28.74 2,056,610 9.03 $ 12.27 1,507,000 $ 8.66
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Under the 1995 Employee Stock Purchase Plan, the Company is authorized to
issue up to 200,000 shares of common stock to its full-time and part-time
employees, all of whom are eligible to participate. Under the terms of the Plan,
employees can choose each year to have up to 10 percent of their annual base
earnings withheld to purchase the Company's common stock. The purchase price of
the stock is 85 percent of the lower of its beginning-of-year or end-of-year
market price. Under the Plan, the Company sold 47,232 shares for $14.24 per
share in 1996 and 43,785 shares for $10.84 per share in 1995. The fair market
value of the right to acquire common stock under the Stock Purchase Plan was
$4.81 per share in 1996 and $3.71 per share in 1995.
Had the compensation cost for the Company's stock-based compensation plans
been determined consistent with SFAS 123, the Company's net income and net
income per common share for 1996 and 1995 would approximate amounts below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net income:
As reported............................................................ $5,105 $10,965
Pro forma.............................................................. 3,826 10,398
Net income per common share:
As reported............................................................ $0.19 $0.52
Pro forma.............................................................. $0.14 $0.50
</TABLE>
In 1996, the Company recorded compensation expense of approximately $1.9
million related to stock units issued to directors and stock options issued to
non-employees of the Company. The expense related to the stock units was equal
to the fair value of the stock for which the units can be converted into on the
date of grant. The fair value of the options was determined using the following
assumptions: risk-free interest rate of 5.79%; expected life of 5 years; and
volatility of 35.1%. The options were 100% vested on the date of grant.
F-17
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
Income tax expense for the years ended December 31, 1996, 1995 and 1994 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
--------- --------- ---------
<S> <C> <C> <C>
1996:
Current................................................................ $ 6,185 $ 1,348 $ 7,533
Deferred............................................................... (185) (48) (233)
--------- --------- ---------
6,000 1,300 7,300
Tax benefit from extraordinary loss.................................... (1,631) (346) (1,977)
--------- --------- ---------
$ 4,369 $ 954 $ 5,323
--------- --------- ---------
--------- --------- ---------
1995:
Current................................................................ $ 6,600 $ 1,260 $ 7,860
Deferred............................................................... (500) (60) (560)
--------- --------- ---------
$ 6,100 $ 1,200 $ 7,300
--------- --------- ---------
--------- --------- ---------
1994:
Current................................................................ $ 5,594 $ 1,075 $ 6,669
Deferred............................................................... (300) (56) (356)
--------- --------- ---------
$ 5,294 $ 1,019 $ 6,313
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provisions for income tax differ from the amount computed by applying
the statutory federal income tax rate due to the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax at the statutory rate................................... $ 3,650 $ 6,393 $ 4,958
Amortization not deductible................................................ 1,262 606 606
State income taxes, net of any current federal income tax benefit.......... 620 780 662
Other...................................................................... (209) (479) 87
--------- --------- ---------
$ 5,323 $ 7,300 $ 6,313
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
The tax effects of the significant temporary differences which comprise the
deferred tax liability at December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Accrued expenses.......................................... $ (9,290) $ (1,992) $ (2,184)
Reserve for pending sale of assets........................ (1,814)
Net operating loss carryforwards.......................... (12,000)
Other..................................................... (2,098) (142) 1,160
---------- --------- ---------
(25,202) (2,134) (1,024)
Deferred tax liabilities:
Property and equipment.................................... 32,427 12,208 11,062
Intangibles............................................... 257,653 (1,457) (861)
---------- --------- ---------
290,080 10,751 10,201
Net Liability........................................... $ 264,878 $ 8,617 $ 9,177
---------- --------- ---------
---------- --------- ---------
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
LEASE AND CONTRACTUAL OBLIGATIONS
The Company and its subsidiaries lease certain land and facilities used in
their operations. The Company also has various employment agreements with
broadcast personalities that provide base compensation. Future minimum payments
under leases and employment agreements as of December 31, 1996 are payable as
follows (in thousands):
<TABLE>
<S> <C>
1997............................................... $ 9,367
1998............................................... 8,830
1999............................................... 8,965
2000............................................... 3,912
2001............................................... 3,238
Thereafter......................................... 9,912
---------
$ 44,224
---------
---------
</TABLE>
Rental expense was approximately $3,996, $3,471 and $3,336 for the years
ended December 31, 1996, 1995 and 1994, respectively.
LEGAL PROCEEDINGS
From time to time, the Company becomes involved in various claims and
lawsuits that are incidental to its business. In the opinion of the Company's
management, there are no material legal proceedings pending against the Company.
F-19
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. RETIREMENT PLAN
The Company maintains a defined contribution retirement plan covering
substantially all employees who have met eligibility requirements. The Company
matches participating employee contributions, subject to a maximum contribution
by the Company of between 1 1/2% to 3% of such employee's annual compensation up
to $150,000 of such compensation. Total expense related to this plan was
$756,618, $334,253 and $289,487 in 1996, 1995 and 1994, respectively.
13. RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". The Company will
implement the Statement in the fourth quarter 1997, the effect of which has not
yet been determined.
SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
YEAR QUARTER QUARTER QUARTER QUARTER TOTAL
- ---------------------------------------------------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1996
Net revenue............................................... $ 30,074 $ 43,120 $ 54,326 $ 96,241 $ 223,761
Operating income.......................................... 2,544 9,372 9,229 18,215 39,360
Net income before extraordinary loss...................... 1,842 3,761 2,100 368 8,071
Net income................................................ 891 3,761 85 368 5,105
Net income per common share:(1)
Before extraordinary loss............................... 0.09 0.17 0.06 0.01 0.30
Extraordinary loss...................................... (0.05) 0.00 (0.06) 0.00 (0.11)
--------- --------- --------- --------- ----------
Net income per common share........................... 0.04 0.17 0.00 0.01 0.19
1995
Net revenue............................................... $ 24,016 $ 30,866 $ 32,294 $ 31,715 $ 118,891
Operating income.......................................... 1,061 5,628 5,899 6,029 18,617
Net income................................................ 751 3,529 3,488 3,197 10,965
Net income per common share(1)............................ 0.04 0.17 0.17 0.16 0.52
</TABLE>
- ------------------------
NOTE:
(1) The sum of the quarterly net income (loss) per share amounts does not equal
the annual amount reported as per share amounts are computed independently
for each quarter.
F-20
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 12,418 $ 78,137
Accounts receivable, less allowance for doubtful accounts of $4,265 in 1997 and
$3,950 in 1996................................................................... 86,326 79,502
Prepaid expenses and other current assets.......................................... 17,081 8,963
------------ ------------
Total current assets............................................................. 115,825 166,602
Property and equipment, net.......................................................... 157,631 131,488
Intangible assets, net............................................................... 1,531,138 1,290,172
Other assets......................................................................... 87,827 116,680
------------ ------------
Total assets..................................................................... $ 1,892,421 $1,704,942
------------ ------------
------------ ------------
<CAPTION>
LIABILITIES
<S> <C> <C>
Current liabilities:
Accounts payable, accrued expenses and other current liabilities................... $ 65,496 $ 55,532
Long-term debt, current portion.................................................... 8,500
------------ ------------
Total current liabilities........................................................ 73,996 55,532
Long-term debt, net of current portion............................................... 688,500 670,000
5 1/2% Liquid Yield Option Notes..................................................... 120,183 118,682
Other liabilities.................................................................... 111,035 108,914
Deferred tax liability............................................................... 302,884 264,878
Commitments and contingencies........................................................
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Preferred Stock, authorized and unissued 4,000,000 shares............................ -- --
Common Stock, no par value, $0.01 per share stated value; authorized 100,000,000
shares, issued and outstanding shares: 34,834,780 in 1997 and 31,287,221 in 1996... 348 313
Additional paid-in capital........................................................... 538,564 432,721
Common stock warrants................................................................ 31,500 26,500
Unrealized gain on investments....................................................... 8,191 2,042
Retained earnings.................................................................... 17,220 25,360
------------ ------------
Total shareholders' equity....................................................... 595,823 486,936
------------ ------------
Total liabilities and shareholders' equity....................................... $ 1,892,421 $1,704,942
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-21
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Broadcast revenue.......................................................................... $ 100,153 $ 33,572
Less agency commissions.................................................................... 11,325 3,498
---------- ---------
Net revenue............................................................................ 88,828 30,074
Broadcast operating expenses............................................................... 67,305 23,870
Depreciation and amortization.............................................................. 13,369 2,619
Corporate general and administrative expenses.............................................. 2,762 1,139
---------- ---------
Operating income....................................................................... 5,392 2,446
Interest expense........................................................................... (17,176) (2,111)
Gain on sale of assets..................................................................... 4,695 2,539
Other income, net.......................................................................... 405 227
---------- ---------
(Loss) income before income taxes and extraordinary loss............................... (6,684) 3,101
Income tax benefit (expense)............................................................... 4,100 (1,259)
---------- ---------
(Loss) income before extraordinary loss................................................ (2,584) 1,842
Extraordinary loss, net of income tax benefit.............................................. (5,556) (951)
---------- ---------
Net (loss) income...................................................................... $ (8,140) $ 891
---------- ---------
Net (loss) income per common share:
Before extraordinary loss................................................................ $ (0.08) $ 0.09
Extraordinary loss....................................................................... (0.16) (0.05)
---------- ---------
Net (loss) income per common share..................................................... $ (0.24) $ 0.04
---------- ---------
---------- ---------
Number of common shares used in per share computations..................................... 34,085 20,503
---------- ---------
---------- ---------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-22
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities............................................. 4,503 4,027
----------- -----------
Cash flows from investing activities:
Capital expenditures.................................................................. (4,860) (3,437)
Cash paid for acquisitions............................................................ (136,190) (48,100)
Proceeds from News Corp. Warrants sale................................................ 44,495 --
Proceeds from sale of radio stations.................................................. -- 6,454
Purchase of Noble warrant............................................................. -- (52,775)
Loans made in conjunction with acquisitions........................................... -- (41,625)
Other................................................................................. -- (841)
----------- -----------
Net cash used by investing activities................................................. (96,555) (140,324)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.............................................. 77,000 190,000
Proceeds from issuance of common stock................................................ -- 496
Repayment of long-term debt........................................................... (50,000) (52,000)
Payment of finance cost............................................................... (667) (3,697)
Other................................................................................. -- (50)
----------- -----------
Net cash provided by financing activities............................................. 26,333 134,749
----------- -----------
Net decrease in cash and cash equivalents............................................... (65,719) (1,548)
Cash and cash equivalents at beginning of period........................................ 78,137 7,437
----------- -----------
Cash and cash equivalents at end of period.............................................. $ 12,418 $ 5,889
----------- -----------
----------- -----------
Supplemental schedule of non-cash investing and financing activities:
Common shares issued in acquisitions.................................................... $ 105,900
Warrants issued in acquisitions......................................................... 5,000
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-23
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS
The December 31, 1996 condensed consolidated balance sheet data was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. The financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Although certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, the Company
believes that the disclosures are adequate to make the information presented not
misleading and reflect all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair presentation of results of
operations for such periods. Results for interim periods may not be indicative
of results for the full year. It is suggested that these financial statements be
read in conjunction with the consolidated financial statements for the year
ended December 31, 1996 and the notes thereto.
2. ACQUISITIONS AND DISPOSITIONS
COMPLETED RADIO STATION ACQUISITIONS
In January 1997, the Company acquired the FCC licenses and broadcast assets
of KIDO-AM and KLTB-FM in Boise, Idaho and KARO-FM in Caldwell, Idaho for a
purchase price of $11.0 million from Colfax Communications, Inc.
In February 1997, the Company purchased certain assets, a construction
permit and related real estate for unconstructed radio station WEDD-FM in
Englewood, Florida for an aggregate of $0.8 million from Sarasota-Charlotte
Broadcasting Corporation.
Also in February 1997, the Company acquired Regent Communications, Inc. for
an approximate aggregate value of $179.9 million, which included (i) the
issuance of approximately 3.55 million shares of common stock valued at $105.9
million, (ii) the issuance of warrants to acquire 500,000 shares of common stock
at $40 per share valued at $5.0 million, (iii) the repayment of approximately
$64.0 million in debt, and (iv) approximately $5.0 million in cash. Regent
owned, operated or represented 19 radio stations located in Kansas City, Salt
Lake City, Las Vegas, Louisville, and Charleston.
In March 1997, the Company acquired the FCC licenses and broadcast assets of
WHO-AM and KLYF-FM in Des Moines and WMT-AM and WMT-FM in Cedar Rapids for a
purchase price of $52.5 million in cash from Palmer Broadcasting Limited
Partnership.
All of the above acquisitions have been accounted for as purchases. The
excess cost over the fair value of net assets acquired is being amortized over
40 years. The results of operations of the acquired businesses are included in
the Company's financial statements since the respective dates of acquisition.
Assuming
F-24
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
each of the first quarter 1997 and 1996 acquisitions had taken place at the
beginning of 1996, unaudited pro forma consolidated results of operations would
have been as follows:
<TABLE>
<CAPTION>
PRO FORMA (UNAUDITED)
QUARTER ENDED MARCH
31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Net revenue........................................................ $ 118,360 $ 107,902
Net loss........................................................... (4,665) (9,043)
Net loss per common share.......................................... $ (0.11) $ (0.21)
</TABLE>
RECENTLY COMPLETED RADIO STATION ACQUISITIONS AND DISPOSITIONS
In April 1997, Jacor acquired the FCC licenses of WIOT-FM and WCWA-AM in
Toledo, Ohio and the real estate and transmission facilities necessary to
operate the stations for a purchase price of $13.0 million.
In April 1997, Jacor exchanged the assets of two radio stations in Phoenix,
KSLX-AM and KSLX-FM, for the assets of two radio stations in San Diego, KGB-FM
and KPOP-AM. The assets exchanged were valued at approximately $45.0 million.
In April 1997, Jacor exchanged the FCC licenses and broadcast assets of
WKRQ-FM, licensed to Cincinnati, for the assets of WVOR-FM, WHAM-AM and WHTK-AM,
licensed to Rochester, New York, and $16.0 million.
In April 1997, Jacor acquired the FCC licenses and broadcast assets of
WNVE-FM in Rochester, New York for a purchase price of $5.5 million.
In April 1997, Jacor acquired the FCC licenses and broadcast assets of: (i)
WIMA-AM and WIMT-FM, licensed in Lima, Ohio, (ii) WBUK-FM, licensed to Ft.
Shawnee, Ohio, and (iii) the construction permit for WLVZ-FM, licensed to St.
Mary's, Ohio, for an aggregate purchase price of $6.5 million.
In April 1997, Jacor purchased the FCC licenses and broadcast assets of
KBGO-FM in Las Vegas for $3.0 million in cash, pursuant to an agreement
originally entered into by Regent Communications, Inc. prior to the closing of
the Regent transaction.
RECENTLY COMPLETED RADIO STATION ACQUISITIONS AND DISPOSITIONS
In May 1997, Jacor acquired the FCC licenses of WSPB-AM, WSRZ-FM and WYNF-FM
in Sarasota, Florida and purchased leasehold interests in real estate and
transmission facilities necessary to operate the stations for a purchase price
of $12.9 million.
In May 1997, Jacor acquired the FCC licenses and broadcast assets of WAZU-FM
(formerly WAHC-FM), licensed to Circleville, Ohio and WHQK-FM (formerly
WAKS-FM), licensed to Marysville, Ohio, for approximately $8.3 million.
In May 1997, Jacor acquired the FCC license and broadcast assets of radio
station KOTK-AM in Portland, Oregon, for a purchase price of $8.3 million.
F-25
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
PENDING RADIO STATION ACQUISITIONS AND DISPOSITIONS
The Company has also entered into agreements to purchase the FCC licenses
and substantially all of the broadcast assets of 33 stations in the following
broadcast areas:
<TABLE>
<CAPTION>
TOTAL ESCROW
PURCHASE AMOUNT
LOCATION PRICE PAID
- -------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
San Diego, California..................................................... $ 27.0 $ 3.7
Lexington and Georgetown, Kentucky........................................ 24.1 1.2
Greeley and Ft. Collins, Colorado......................................... 7.2 3.6
Sebring, Florida.......................................................... 0.2 --
Lexington, Louisville, and Munfordville, Kentucky......................... 10.5 0.7
Irondequoit, Canadaigua and Honeoye Falls, New York....................... 7.0 0.3
Spanish Fork, Utah........................................................ 4.5 0.1
Santa Barbara and Carpinteria, California................................. 15.0 0.3
Cleveland, Ohio........................................................... 46.0 --
Cheyenne, Wyoming......................................................... 5.5 0.8
Sandusky, Ohio............................................................ 7.7 0.5
Garden City and Eagle, Idaho.............................................. 8.0 8.0
Salt Lake City, Utah...................................................... 1.2 0.1
----------- -----
Total................................................................. $ 163.9 $ 19.3
----------- -----
----------- -----
</TABLE>
In the second quarter of 1997, Jacor entered into a binding agreement to
sell KCBQ-AM, San Diego, WEZL-FM and WXLY-FM, Charleston, SC, and WXZZ-FM,
Lexington to JS Communications, Inc. for $23.0 million.
PENDING AND COMPLETED SYNDICATION AND OTHER ACQUISITIONS
In April 1997, the Company acquired substantially all of the assets relating
to the broadcast distribution and related print and electronic media publishing
businesses of EFM Media Management, for $50.0 million.
In April 1997, Jacor purchased the assets of NSN Network Services, a leading
provider of satellite and network services for the radio broadcasting industry,
for $11.0 million, consisting of approximately $9.3 million in cash and $1.7
million in shares of Jacor common stock.
Also in April 1997, the Company acquired the assets of Airwatch
Communications, Inc. and Airtraffic Communications, Inc. for a purchase price of
approximately $18.0 million.
Additionally, in April 1997, Jacor entered into an agreement to acquire
Premiere Radio Networks, Inc. (the "Merger Agreement") for aggregate
consideration of approximately $185.8 million. The Premiere stockholders will
receive $13.50 in cash and .1525424 shares of Jacor common stock for each
outstanding share of Premiere common stock. The Merger Agreement consideration
is subject to adjustment if the agreement is not consummated by July 31, 1997
or, if the average closing price of Jacor
F-26
<PAGE>
JACOR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
common stock for the 10 trading days prior to consummation of the agreement is
less than $26.50 or more than $32.50.
3. OTHER ASSETS
The Company's investment in the News Corp. Warrants was sold in February
1997 for $44.5 million and the Company recorded a pretax gain of $4.7 million.
4. RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". The Company will
implement the Statement in the fourth quarter 1997. Diluted Earnings Per Share,
as defined by the Statement, is expected to approximate the Company's fully
diluted Earnings Per Share, as currently calculated. The Company will also be
required to present basic earnings per share, which will be calculated using the
weighted average shares of common stock outstanding for the reporting period
without giving effect to outstanding options, warrants or other potentially
dilutive securities.
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
We have audited the accompanying combined balance sheets of EFM Media
Management, Inc., EFM Publishing, Inc., and PAM Media, Inc., (the "Combined EFM
Companies") as of December 31, 1995 and 1996 and related combined statements of
operations, changes in retained earnings and cash flows for the years ended
December 31, 1994, 1995 and 1996. These financial statements are the
responsibility of the Combined EFM Companies' management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principlees used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Combined EFM
Companies as of December 31, 1995 and 1996 and the combined results of their
operations and their cash flows for the years ended December 31, 1994, 1995 and
1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
February 28, 1997
F-28
<PAGE>
THE COMBINED EFM COMPANIES
COMBINED BALANCE SHEETS
AS OF DECEMBER 31
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................ $ 3,325,273 $ 4,867,943
Accounts receivable.............................................................. 4,785,339 2,219,874
Investment securities............................................................ 5,564,434 5,894,380
Prepaid expenses................................................................. 1,553,205 1,292,591
Other............................................................................ 30,896 95,760
------------- -------------
Total current assets........................................................... 15,259,147 14,370,578
Property and equipment, net...................................................... 175,592 153,173
Other............................................................................ 33,165 33,109
------------- -------------
Total assets................................................................... $ 15,467,904 $ 14,556,830
------------- -------------
------------- -------------
Current liabilities:
Accounts payable and accrued liabilities......................................... $ 4,617,956 $ 4,739,223
Deferred income.................................................................. 8,436,506 6,415,585
------------- -------------
Total current liabilities...................................................... 13,054,462 11,154,808
Deferred income.................................................................... 2,380,006 3,321,642
------------- -------------
Total liabilities.............................................................. 15,434,468 14,476,450
------------- -------------
Commitments and contingencies
Shareholders' equity:
Common stock..................................................................... 2,020 2,020
Retained earnings................................................................ 10,234 51,798
Net unrealized gain on investment securities..................................... 21,182 26,562
------------- -------------
Total shareholders' equity..................................................... 33,436 80,380
------------- -------------
Total liabilities and shareholders' equity..................................... $ 15,467,904 $ 14,556,830
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-29
<PAGE>
THE COMBINED EFM COMPANIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net revenue......................................................... $ 45,169,563 $ 46,930,790 $ 47,356,777
Operating expenses.................................................. 29,246,898 29,520,679 29,537,668
Depreciation........................................................ 78,261 85,799 83,626
Corporate general and administrative expenses:
Executive compensation............................................ 12,282,821 11,596,958 12,028,181
Other............................................................. 1,459,798 1,632,610 1,617,205
------------- ------------- -------------
Operating income................................................ 2,101,785 4,094,744 4,090,097
Other income, net................................................... 353,836 445,779 487,662
------------- ------------- -------------
Net income...................................................... $ 2,455,621 $ 4,540,523 $ 4,577,759
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-30
<PAGE>
THE COMBINED EFM COMPANIES
COMBINED STATEMENT OF CHANGES IN
RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Balance, beginning of year........................................... $ (10,225) $ (30,289) $ 10,234
Net income........................................................... 2,455,621 4,540,523 4,577,759
Distributions to shareholders........................................ (2,475,685) (4,500,000) (4,536,195)
------------- ------------- -------------
Balance, end of year............................................. $ (30,289) $ 10,234 $ 51,798
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-31
<PAGE>
THE COMBINED EFM COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Cash flow from operating adtivities:
Net income......................................................... $ 2,455,621 $ 4,540,523 $ 4,577,759
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation..................................................... 78,261 85,799 83,626
Changes in operating assets and liabilities:
Accounts receivable............................................ 270,875 (2,220,218) 2,565,465
Prepaid expenses............................................... (386,359) 558,744 260,614
Accounts payable and accrued liabilities....................... 4,415,637 (1,283,298) 121,267
Deferred income................................................ 1,838,311.... (1,739,085) (1,079,285)
Other.......................................................... (4,815) 120,559 (24,638)
------------- ------------- -------------
Net cash provided by operating activities............................ 8,667,531 63,024 6,504,808
------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures............................................... (188,679) (31,878) (61,207)
Purchases of investments........................................... (2,997,894) (7,058,791) (5,746,293)
Proceeds from sales of investments................................. 2,941,219 6,488,880 5,421,727
------------- ------------- -------------
Net cash used in investing activities................................ (245,354) (601,789) (385,773)
------------- ------------- -------------
Cash flow from financing activities:
Distributions to shareholders...................................... (2,475,685) (4,500,000) (4,536,195)
Advances to shareholders........................................... (65,515) 83,435 (40,170)
------------- ------------- -------------
Net cash used in financing activities................................ (2,541,200) (4,416,565) (4,576,365)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents................. 5,880,977 (4,955,330) 1,542,670
Cash and cash equivalents at beginning of year....................... 2,399,626 8,280,603 3,325,273
------------- ------------- -------------
Cash and cash equivalents at end of year............................. $ 8,280,603 $ 3,325,273 $ 4,867,943
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-32
<PAGE>
THE COMBINED EFM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS:
a. DESCRIPTION OF BUSINESS: The accompanying combined financial statements
include the operations of EFM Publishing, Inc. ("EFM Publishing"), EFM
Media Management, Inc. ("EFM Media"), and PAM Media, Inc. ("PAM Media"),
(collectively the "Combined EFM Companies"). The Combined EFM Companies
produce two nationally syndicated radio talk shows and a nationally
published newsletter. All significant intercompany accounts and
transactions have been eliminated.
b. CASH AND CASH EQUIVALENTS: The Combined EFM Companies consider all
highly liquid investments purchased with an original maturity of less
than three months to be cash equivalents.
c. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less
accumulated depreciation; depreciation is provided by accelerated methods
over the estimated useful lives of five and seven years.
d. INVESTMENT SECURITIES: Investment in debt securities are considered
available for sale and carried at fair value, based on quoted market
prices. Unrealized gains and losses are reported as a separate component
of stockholders' equity until realized.
e. REVENUES: Broadcast revenues consist of commercial broadcasting
advertisements, net of agency commissions, and syndication fees from
radio stations. Advertising revenues are recognized when the commercial
is broadcast. Syndication fees received in advance are recorded as
deferred revenue and recognized over the length of the agreement.
Publishing revenue for subscription payments received in advance is
recognized over the average length of all subscriptions.
f. ADVERTISING COSTS: Direct-response advertising is capitalized and
amortized over its expected period of future benefits. Direct-response
advertising consists of television and radio advertisements, renewal
notices sent to current newsletter subscribers and direct mail notices
sent to former subscribers. The capitalized costs of the advertising are
amortized over approximately one year.
Advertising expense for 1994, 1995 and 1996 was approximately
$4,563,000, $3,508,000 and $3,122,000, respectively.
g. CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially
subject the Combined EFM Companies to concentrations of credit risk
consist principally of accounts receivable. Concentrations of credit risk
associated with accounts receivable are limited due to the large number
of customers comprising the Combined EFM Companies' customer base.
h. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities, at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
i. INCOME TAXES: The Combined EFM Companies have elected to be taxed as an
"S" corporation under the Internal Revenue Code and New York State tax
law. Accordingly, only the appropriate state and local income and
franchise taxes have been provided for in the accompanying financial
statements.
F-33
<PAGE>
THE COMBINED EFM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUBSEQUENT EVENT:
In March 1997, the Combined EFM Companies entered into an asset purchase
agreement with Jacor Communications, Inc. ("Jacor"), for the sale of all
operating assets of the Combined EFM Companies.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Computer equipment.................................................. $ 224,997 $ 273,457
Furniture and fixtures.............................................. 173,439 176,483
Other equipment..................................................... -- 9,703
----------- -----------
398,436 459,643
Less accumulated depreciation....................................... (222,844) (306,470)
----------- -----------
$ 175,592 $ 153,173
----------- -----------
----------- -----------
</TABLE>
4. INVESTMENT SECURITIES:
A summary of the investment securities held by the Combined EFM Companies at
December 31, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED
FAIR VALUE GAINS LOSSES
------------ ----------- -----------
<S> <C> <C> <C>
U.S. Treasury Securities............................... $ 3,030,670 $ 35,934 $
Corporate Bonds........................................ 1,957,611 1,425 1,195
Bond Funds............................................. 576,153 14,982
------------ ----------- -----------
$ 5,564,434 $ 37,359 $ 16,177
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------
GROSS GROSS
ESTIMATED UNREALIZED UNREALIZED
FAIR VALUE GAINS LOSSES
------------ ----------- -----------
<S> <C> <C> <C>
U.S. Treasury Securities............................... $ 2,506,719 $ 11,373 $ 8,182
Corporate Bonds........................................ 2,515,159 1,271 1,876
Bond Funds............................................. 872,502 23,976
------------ ----------- -----------
$ 5,894,380 $ 36,620 $ 10,058
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
F-34
<PAGE>
THE COMBINED EFM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT SECURITIES: (CONTINUED)
Contractual maturities of debt securities at December 31, 1996 are as
follows:
<TABLE>
<S> <C>
Due in: 1997.................................................... $2,503,857
1998..................................................... 695,059
1999..................................................... 248,400
2000..................................................... 1,065,952
2001..................................................... 1,257,186
Thereafter............................................... 123,926
---------
$5,894,380
---------
---------
</TABLE>
Net realized losses from the sale of investment securities in 1994, 1995 and
1996 were $731, $28,738 and $16,101, respectively.
5. CAPITAL STOCK AND RELATED PARTY TRANSACTION:
The shares of the Combined EFM Companies are owned or controlled by a sole
shareholder and spouse. The following table sets forth the capitalization of the
companies as of December 31, 1995 and 1996.
<TABLE>
<CAPTION>
ISSUED AND
AUTHORIZED OUTSTANDING PAR VALUE
----------- --------------- -----------
<S> <C> <C> <C>
EFM Media................................................ 200 100 $ 1,000
EFM Publishing........................................... 200 100 $ 1,000
PAM Media................................................ 20,000 20 $ 20
</TABLE>
EFM Media and PAM Media granted options to two senior executives to purchase
approximately 35 and 5 unissued shares of EFM Media and PAM Media, respectively.
The exercise price is equal to the book value of such shares based upon the most
recent annual financial statements of the respective companies. The options
expire ten years from the date of grant, and may be exercised at any time during
that period.
6. COMMITMENTS AND CONTINGENCIES:
a. LEASE AND EMPLOYMENT AGREEMENT OBLIGATIONS: The Combined EFM Companies
lease facilities used in their operations under noncancelable operating
leases. The Combined EFM Companies also have various employment
agreements with certain radio personalities and the writer of its
newsletter requiring minimum payments. Future minimum payments under
lease and employment agreements are as follows:
<TABLE>
<S> <C>
1997............................................................ $ 881,846
1998............................................................ 955,021
1999............................................................ 81,140
---------
Total commitments............................................... $1,918,007
---------
---------
</TABLE>
b. LEGAL PROCEEDINGS: The Combined EFM Companies are party to various
legal proceedings. In the opinion of management, the ultimate resolution
of such proceedings will not have a
F-35
<PAGE>
THE COMBINED EFM COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
significant effect on the financial position or results of operations of
the Combined EFM Companies.
c. TALENT FEE ARRANGEMENTS: The Combined EFM Companies have entered into
agreements with their on-air radio personalities whereby the
personalities receive compensation based upon formulas defined within the
agreements. In addition, the Combined EFM Companies have entered into an
agreement with the writer of the newsletter whereby the writer and one
additional party are entitled to receive a percentage of revenues less
certain expenses, as defined within the agreement.
7. RETIREMENT PLAN:
EFM Media maintains a defined contribution retirement plan covering
substandially all employees who have met eligibility requirements. Employer
contributions are made solely at the discretion of the employer; however, no
such contributions have ever been made.
F-36
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Premiere Radio Networks, Inc.
We have audited the accompanying consolidated balance sheets of Premiere
Radio Networks, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Premiere Radio
Networks, Inc. at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Los Angeles, California
February 21, 1997
F-37
<PAGE>
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 14,776,436 $ 5,432,088
Accounts receivable, less allowance for doubtful accounts of $144,000 (1996) and
$214,000 (1995)................................................................ 7,165,928 4,086,623
Notes receivable from officer/employees.......................................... 98,172 282,279
Recoverable income taxes (Note 7)................................................ 213,828 250,952
Deferred income taxes (Note 7)................................................... 1,000,993 549,000
Prepaid expenses and other assets................................................ 739,208 1,375,805
------------- -------------
Total current assets........................................................... 23,994,565 11,976,747
Notes receivable from officer/employees (Note 9)................................... 668,356 845,000
Investments (Note 15).............................................................. 4,215,268 --
Deferred income taxes.............................................................. 99,000 --
Property and equipment, at cost, less accumulated depreciation and amortization
(Note 4).......................................................................... 2,318,939 1,797,337
Acquired program library and program networks, net of accumulated amortization of
$699,217 (1996) and $367,469 (1995) (Note 2)...................................... 1,368,223 1,699,971
Intellectual property, net of accumulated amortization of $1,376,893 (1996) and
$550,200 (1995) (Note 2).......................................................... 14,002,048 4,858,749
Debt issuance costs, net of accumulated amortization of $27,300 (1995) (Notes 10
and 11)........................................................................... -- 2,143,729
Other assets (Note 9).............................................................. 899,558 711,968
------------- -------------
Total assets................................................................... $ 47,565,957 $ 24,033,501
------------- -------------
------------- -------------
</TABLE>
See Accompanying Notes.
F-38
<PAGE>
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other liabilities
(Notes 8 and 10)............................................................... $ 1,535,429 $ 1,722,205
Accrued payroll, bonuses, deferred compensation and profit sharing contribution
(Note 9)....................................................................... 830,788 905,468
Income taxes payable (Note 7).................................................... 15,920 25,022
Deferred revenue (Notes 2 and 15)................................................ 250,000 83,326
Current portion of notes payable, net of discount of $6,568 (1996)
(Note 5)....................................................................... 505,932 400,000
------------- -------------
Total current liabilities...................................................... 3,138,069 3,136,021
Notes payable, net of discount of $45,045 (1995), less current portion (Notes 2 and
5)................................................................................ 75,125 1,467,455
Deferred revenue................................................................... 1,516,800 --
Due to related party (Note 10)..................................................... -- 120,000
Other liabilities (Note 9)......................................................... 258,482 7,714
Commitments and contingencies (Note 6).............................................
Stockholders' equity (Notes 10 and 12):
Preferred stock, par value $.01 per share, 5,000,000 shares authorized........... -- --
Common stock, par value $.01 per share, 14,000,000 shares authorized, 3,592,675
and 3,641,650 shares issued at December 31, 1996 and 1995, respectively........ 35,927 36,417
Class A common stock, par value $.01 per share, 20,000,000 shares authorized,
4,041,420 shares issued at December 31, 1996................................... 40,414 --
Additional paid-in capital....................................................... 34,617,213 11,752,595
Retained earnings................................................................ 9,834,325 7,513,299
Less cost of common stock held in treasury, 1,000 shares of common stock and
186,600 shares of Class A common stock at December 31, 1996.................... (1,950,398) --
------------- -------------
Total stockholders' equity..................................................... 42,577,481 19,302,311
------------- -------------
Total liabilities and stockholders' equity..................................... $ 47,565,957 $ 24,033,501
------------- -------------
------------- -------------
</TABLE>
See Accompanying Notes.
F-39
<PAGE>
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Revenue:
Gross revenue..................................................... $ 27,147,199 $ 20,756,932 $ 18,015,998
Less agency commissions........................................... (3,321,637) (2,437,973) (2,036,600)
------------- ------------- -------------
Net operating revenue............................................... 23,825,562 18,318,959 15,979,398
Operating expenses:
Production, programming and promotions............................ 7,495,131 5,472,346 5,284,036
Selling, general and administrative............................... 9,038,141 7,827,153 7,664,557
Depreciation and amortization..................................... 1,908,035 1,265,358 937,649
Other charges (Note 11)........................................... 417,045 -- --
------------- ------------- -------------
Total operating expenses........................................ 18,858,352 14,564,857 13,886,242
------------- ------------- -------------
Operating income.................................................... 4,967,210 3,754,102 2,093,156
Other income and expenses:
Interest income................................................... 1,217,885 262,046 88,989
Interest expense.................................................. (101,807) (244,503) (266,289)
Gain on sale of networks.......................................... -- -- 1,659,642
Gain on sale of radio station assets.............................. -- 452,919 --
Gain (loss) on sale of marketable securities and other............ -- 18,445 (221,112)
Write-off of debt issuance costs (Note 11)........................ (1,949,120) -- --
------------- ------------- -------------
(833,042) 488,907 1,261,230
------------- ------------- -------------
Income before minority interest and income taxes.................... 4,134,168 4,243,009 3,354,386
Minority interest in loss of joint venture.......................... -- 34,121 --
------------- ------------- -------------
Income before income taxes.......................................... 4,134,168 4,277,130 3,354,386
Provision for income taxes (Note 7)................................. 1,698,000 1,721,000 1,369,000
------------- ------------- -------------
Net income.......................................................... $ 2,436,168 $ 2,556,130 $ 1,985,386
------------- ------------- -------------
------------- ------------- -------------
Earnings per share.................................................. $ 0.28 $ 0.46 $ 0.43
------------- ------------- -------------
------------- ------------- -------------
Weighted average common and common equivalent shares outstanding.... 8,929,954 6,105,494 4,664,921
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Accompanying Notes.
F-40
<PAGE>
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK TREASURY STOCK ADDITIONAL
------------------ ------------------ -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- --------- ------- ------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993.................... 3,000,000 $30,000 -- $ -- -- $ -- $ 5,057,234 $2,971,783 $ 8,059,017
Net income for 1994.... -- -- -- -- -- -- -- 1,985,386 1,985,386
Exercise of options.... 10,832 108 -- -- -- -- 77,176 -- 77,284
--------- ------- --------- ------- ------- ----------- ----------- ---------- -----------
Balance at December 31,
1994.................... 3,010,832 30,108 -- -- -- -- 5,134,410 4,957,169 10,121,687
Net income............. -- -- -- -- -- -- -- 2,556,130 2,556,130
Sale of common stock
and Class B
warrants............. 500,000 5,000 -- -- -- -- 3,855,877 -- 3,860,877
Issuance of Class A
warrants............. -- -- -- -- -- -- 1,378,650 -- 1,378,650
Income tax benefit from
stock options
exercised............ -- -- -- -- -- -- 400,000 -- 400,000
Exercise of options and
warrants............. 130,818 1,309 -- -- -- -- 983,658 -- 984,967
--------- ------- --------- ------- ------- ----------- ----------- ---------- -----------
Balance at December 31,
1995.................... 3,641,650 36,417 -- -- -- -- 11,752,595 7,513,299 19,302,311
Net income............. -- -- -- -- -- -- -- 2,436,168 2,436,168
Exchange of common
stock for Class A
common stock......... (140,000) (1,400 ) 140,000 1,400 -- -- -- -- --
Issuance of Class A
common stock......... -- -- 1,360,000 13,600 -- -- 22,035,167 -- 22,048,767
Income tax benefit from
stock options
exercised............ -- -- -- -- -- -- 262,000 -- 262,000
Stock dividend......... -- -- 2,502,988 25,030 -- -- -- (25,030) --
Exercise of options and
warrants............. 91,025 910 38,432 384 -- -- 567,451 -- 568,745
Unrealized loss on
securities available
for sale............. -- -- -- -- -- -- -- (90,112) (90,112)
Purchase of treasury
stock................ -- -- -- -- 187,600 (1,950,398) -- -- (1,950,398)
--------- ------- --------- ------- ------- ----------- ----------- ---------- -----------
Balance at December 31,
1996.................... 3,592,675 $35,927 4,041,420 $40,414 187,600 $(1,950,398) $34,617,213 $9,834,325 $42,577,481
--------- ------- --------- ------- ------- ----------- ----------- ---------- -----------
--------- ------- --------- ------- ------- ----------- ----------- ---------- -----------
</TABLE>
See Accompanying Notes.
F-41
<PAGE>
PREMIERE RADIO NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................. $ 2,436,168 $ 2,556,130 $ 1,985,386
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization......... 1,908,035 1,265,358 937,649
Loss on sale of marketable
securities.......................... -- -- 221,114
Write-off of debt issuance costs...... 1,949,120 -- --
Gain on sale of networks.............. -- -- (1,659,642)
Gain on sale of radio station
assets.............................. -- (452,919) --
Gain on sale of fixed assets.......... (1,216) (12,636) --
Deferred compensation................. -- -- 106,939
Deferred operating costs of radio
station............................. -- (260,071) (431,667)
(Decrease) increase in allowance for
doubtful accounts................... (70,000) 8,000 53,000
Changes in deferred income taxes...... (551,000) (290,000) (353,000)
Changes in operating assets and
liabilities:
Accounts receivable................. (3,009,305) (948,679) (602,494)
Income taxes........................ 28,029 (404,249) 447,319
Prepaid expenses and other current
assets............................ 566,432 (1,060,751) (308,795)
Notes receivable from
officer/employees................. 110,751 (797,612) (339,767)
Investments......................... (6,825) -- --
Other assets........................ (187,590) 25,082 (327,818)
Accounts payable and accrued
liabilities....................... (227,326) 232,344 342,631
Deferred income..................... 1,683,474 (521,129) 549,840
Other liabilities................... 242,979 (99,225) --
------------ ----------- -----------
Net cash provided by (used in) operating
activities............................. 4,871,726 (760,357) 620,695
------------ ----------- -----------
INVESTING ACTIVITIES
Acquisition of property and equipment... (1,250,046) (631,084) (469,579)
Acquisition of intangible assets........ (9,713,176) (2,320,935) (3,986,199)
Purchase of common stock of Audio Net... (4,000,028) -- --
Net proceeds from sale of radio station
assets................................. -- 5,565,496 --
Net proceeds from sale of equipment..... 35,000 80,000 --
Sale of program networks................ -- -- 2,136,339
Sale of marketable securities, net...... -- -- 1,095,896
------------ ----------- -----------
Net cash (used in) provided by investing
activities............................. (14,928,250) 2,693,477 (1,223,543)
FINANCING ACTIVITIES
Proceeds from borrowings................ -- -- 2,500,000
Repayment of note payable to officer.... -- (750,000) --
Repayment of borrowings................. (1,528,242) (2,962,500) (237,500)
Proceeds from issuance of common stock
and Class B warrants................... -- 3,860,877 --
Proceeds from issuance of Class A common
stock.................................. 22,048,767 -- --
Exercise of stock options and warrants,
including related tax benefit.......... 830,745 1,384,967 77,284
Increase in debt issuance costs......... -- (405,690) --
Purchase of treasury stock.............. (1,950,398) -- --
------------ ----------- -----------
Net cash provided by financing
activities............................. 19,400,872 1,127,654 2,339,784
------------ ----------- -----------
Increase in cash and cash equivalents... 9,344,348 3,060,774 1,736,936
Cash and cash equivalents at beginning
of year................................ 5,432,088 2,371,314 634,378
------------ ----------- -----------
Cash and cash equivalents at end of
year................................... $ 14,776,436 $ 5,432,088 $ 2,371,314
------------ ----------- -----------
------------ ----------- -----------
Cash paid for:
Interest.............................. $ 11,034 $ 198,058 $ 250,135
------------ ----------- -----------
------------ ----------- -----------
Income taxes.......................... $ 1,929,612 $ 1,998,871 $ 1,271,700
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See Accompanying Notes.
F-42
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Premiere Radio Networks, Inc. (the Company) is an independent creator,
producer and distributor of comedy, entertainment and music-related network
radio programming, and research and other services. The Company derives a
substantial portion of its revenues from the sale of commercial radio broadcast
time to advertisers. The Company obtains commercial radio broadcast time from
third party radio station affiliates in exchange for its network radio programs
and services. The Company also derives a portion of its revenues from
commissions on sales of commercial broadcast time which it sells on behalf of
third party network radio programmers pursuant to exclusive sales representation
agreements. Substantially all of the Company's accounts receivable are from
advertising agencies that purchase commercial broadcast time from the Company on
behalf of national advertisers. The Company generally does not require
collateral from its customers.
The Company also owned a radio station in Denver, Colorado (see Note 2).
Radio station revenues were generally derived from the sale of commercial
broadcast time to advertisers and from the leasing of the radio station to a
buyer (from October 1, 1994 through February 28, 1995).
PRINCIPLES OF CONSOLIDATION
The consolidated 1995 financial statements include the accounts of the
Company's 75% owned joint venture (see Note 3). All material intercompany
transactions and accounts have been eliminated. Effective on September 3, 1996,
the Company acquired the other partner's interest in the joint venture and
merged the joint venture entity into the Company as part of one of its
divisions.
REVENUE RECOGNITION
Revenue from the sale to advertisers of commercial broadcast time obtained
in exchange for produced radio programs or research and other services is
recognized when the commercials are broadcast. Sales representation commission
revenue is recognized when the commercials are broadcast. Promotional fees are
recognized as services are rendered. Amounts received prior to the rendering of
promotional related services are recorded as deferred revenue.
Radio station revenue was recognized in the period in which commercials were
broadcast or in the case of the Local Programming and Marketing Agreement (LMA)
(see Note 2) in the period during which the LMA pertains.
Barter revenues, representing commercial broadcast time exchanged for
products or services, are recognized when the commercials are broadcast and are
recorded at the lesser of the estimated fair value of the commercial broadcast
time or the estimated fair value of products or services received, whichever is
more readily determinable.
PRODUCTION AND PROGRAMMING COSTS
Production and programming costs are expensed in the period in which they
occur. Costs related to programs not broadcast as of the balance sheet date are
insignificant. The Company does not capitalize costs associated with production
and distribution of internally developed programming, as the estimated future
revenues from this programming is considered immaterial.
F-43
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs are expensed in the period in which they occur. The
accompanying statements of income include advertising costs of $105,000 in 1996,
$160,000 in 1995 and $153,000 in 1994.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less, when purchased, to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization is
computed by the straight-line method over the estimated useful lives of the
related assets as follows:
Office furniture and equipment 5 years
Production and programming equipment 5 - 7 years
Leasehold improvements Remaining life of lease
MARKETABLE SECURITIES
The Company determines the appropriate classification of debt and equity
securities at the time of purchase and reevaluates their classification at each
balance sheet date. Securities are classified as held-to-maturity when the
Company has the intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at cost and investment income is included
in earnings. The Company classifies certain highly liquid securities as trading
securities. Trading securities are stated at fair value and unrealized holding
gains and losses are included in income. Securities that are not classified as
held-to-maturity or trading are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
holding gains and losses, net of tax, reported in stockholders' equity.
FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. Unless
otherwise described, the fair values of financial instruments approximate their
recorded values.
DEBT ISSUANCE COSTS
Debt issuance costs include the value of certain of the Class A warrants and
commitment fees, legal and other professional costs directly related to the
subordinated debentures. Debt issuance costs related to commitment fees incurred
in connection with the subordinated debentures were being amortized over a
seven-year period using the straight-line method. During the fourth quarter of
1996, the Company wrote-off the then remaining unamortized balance of debt
issuance costs (Notes 10 and 11).
INTANGIBLE ASSETS
Intangible assets are stated at cost and consist of program networks, an
acquired program library, production music libraries and other intellectual
properties. The carrying value of intangible assets are
F-44
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reviewed if the facts and circumstances suggest they may be impaired. If this
review indicates that the intangible assets will not be recoverable based on the
undiscounted cash flows over the remaining amortization period, the Company's
carrying value of the intangible assets will be reduced by the estimated short
fall of the discounted cash flows.
PROGRAM NETWORKS: Program networks represent the value of contracts with
various radio stations to broadcast certain Company-produced programming and the
tradenames and contracts with talent, used in the production of programming. The
program networks are being amortized over a seven-year or ten-year period using
the straight-line method.
ACQUIRED PROGRAM LIBRARY: The acquired program library represents the value
of a compilation of sports radio broadcasts purchased by the Company to produce
sports-oriented programming. The library is being amortized over a seven-year
period using the straight-line method.
INTELLECTUAL PROPERTY: Intellectual property consists of acquired software
used in radio broadcast research and the tradenames Mediabase and Newstrack, and
contracts with various third party radio station affiliates which subscribe to
the Mediabase and/or Newstrack research services. In addition, intellectual
property includes production music libraries consisting of copyrights or
exclusive licenses to production music and jingles libraries, including
short-form background music utilized in the production of radio programs,
commercials and jingles. Intellectual property is being amortized over a
seven-year or ten-year period using the straight-line method.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes, in
accordance with Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes."
EARNINGS PER SHARE
The computation of earnings per common and common equivalent shares is based
upon the weighted average number of common shares outstanding during the period
plus (in periods in which they have a dilutive effect) the effect of common
shares contingently issuable, primarily from the assumed exercise of stock
options and warrants to purchase common stock.
During 1996 and 1995, primary earnings per share and fully diluted earnings
per share were the same. During 1994, stock options and warrants to purchase
common stock were antidilutive for purposes of calculating fully diluted
earnings per share.
Earnings per share for the years ended December 31, 1996 and 1995, is
computed under the modified treasury stock method which assumes the exercise of
all outstanding stock options and warrants to purchase common stock, and the use
of the assumed proceeds thereof to purchase up to a maximum of 20% of the then
outstanding common stock of the Company. Excess proceeds derived from the
assumed purchase of such shares are assumed to be utilized to first reduce the
outstanding balances of notes payable and second for investment in short-term,
cash equivalent marketable securities. As a result, for purposes of determining
earnings per share, net income is adjusted for the hypothetical reduction in
interest expense ($16,000 and $108,000 for 1996 and 1995, respectively) and for
hypothetical interest
F-45
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income related to the assumed investment in marketable securities ($48,000 and
$140,000 for 1996 and 1995, respectively), such adjustments being made net of
income taxes.
Earnings per share for the year ended December 31, 1994 was computed under
the treasury stock method. Under the treasury stock method, the Company reduces
the assumed number of common shares issued from the exercise of stock options
and warrants to purchase common stock by the number of treasury shares assumed
to be purchased from the proceeds of such dilutive securities by utilizing the
average market price of the Company's common stock.
During March 1996 the Company's Board of Directors declared a 1-for-2 stock
dividend effected in the form of a 3-for-2 stock split. The stock dividend was
payable in shares of Class A common stock to holders of record of the Company's
common stock and Class A common stock (Stock Dividend). All references in the
financial statements to the number of shares and per share amounts prior to
March 1996, have been retroactively adjusted for the stock dividend.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 established a fair value-based method of
accounting for compensation cost related to stock options and other forms of
stock-based compensation plans. However, SFAS 123 allows an entity to continue
to measure compensation costs using the principles of APB 25 if certain pro
forma disclosures are made. The Company has elected to account for its stock
compensation arrangements under the provisions of APB 25, "Accounting for Stock
Issued to Employees." The Company adopted the provisions for pro forma
disclosure requirements of SFAS 123 in fiscal 1996.
CHANGE IN BASIS OF PRESENTATION
Certain reclassifications have been made to the 1995 and 1994 financial
statements in order to conform to the 1996 presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-46
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS
RADIO STATION
On March 12, 1993, the Company completed an acquisition of certain assets of
radio station KZDG-FM in Denver, Colorado (KZDG-FM), for $3,605,395, including
acquisition costs. On September 30, 1994, the Company entered into an agreement
with Shamrock Broadcasting Inc. (Shamrock), a Delaware corporation, pursuant to
which the Company sold the radio station and broadcast license. The sale was
completed on February 28, 1995. Under the terms of the agreement, Shamrock
acquired the assets of the radio station, exclusive of cash, accounts receivable
and certain identified assets for $5,500,000. In connection with the sale, the
Company deferred operating losses and disposition costs of $432,000 for the
period October 1, 1994 to December 31, 1994. For the year ended December 31,
1994 the radio station had revenues of $1,209,000 and losses from operations
before income taxes of $729,000.
The Company also entered into a LMA with Shamrock pursuant to which the
Company licensed its broadcast time to Shamrock, including advertising time, for
$22,500 per month commencing October 1, 1994. The LMA terminated upon the
consummation of the sale of the radio station to Shamrock.
OLYMPIA PROGRAM NETWORKS
On November 29, 1993, the Company acquired nine radio program networks from
Olympia Networks of Missouri, Inc., including three comedy, one country music
and five sports program networks for $1,000,000.
On March 1, 1994, the Company completed the sale of the five sports program
networks for $2,700,000. In connection with the sale, the Company issued
warrants to purchase 15,000 shares of the Company's common stock exercisable at
$8 per share through February 28, 1998.
In addition, the Company signed an agreement to provide certain future sales
representation services on an exclusive basis to the buyer of the networks for a
period of three years. In connection with the sales representation agreement,
the Company received a nonrefundable $1,000,000 advance which was recognized as
income in accordance with the terms of the agreement.
ACQUIRED SPORTS RADIO PROGRAM LIBRARY
On December 14, 1994, the Company acquired a collection of sports radio
broadcasts (the Library) from a corporation controlled by an officer of the
Company. The Library was acquired for $1,500,000 (exclusive of acquisition costs
of $19,286) payable, $750,000 at closing and $750,000 on April 1, 1995.
BROADCAST RESULTS GROUP (BRG)
On August 29, 1995, the Company acquired substantially all of the assets of
BRG for $2,337,500 cash and a noninterest bearing, 18-month note payable with a
face amount of $412,500. The assets of BRG acquired by the Company consist
principally of intellectual properties and other intangibles, including
production music libraries, third-party radio station affiliate broadcast
contracts, and copyrights. The Company did not assume any preacquisition
accounts payable or other obligations of BRG, except for certain commitments
under real property and equipment leases. The acquisition of BRG has been
accounted for using the purchase method of accounting. The former chief
executive officer and 39% stockholder of BRG has been employed by the Company
pursuant to a four-year employment agreement.
F-47
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
The results of operations of BRG have been included in the consolidated
statement of income from the date of acquisition.
The net purchase price was allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment.......................... $ 25,000
Intellectual property.................................. 2,543,000
Other assets........................................... 25,000
-----------
$ 2,593,000
-----------
-----------
</TABLE>
PHILADELPHIA MUSIC WORKS (PMW)
On September 27, 1996 the Company acquired substantially all of the assets
of Philadelphia Music Works, Inc. (PMW) from an employee (the former chief
executive officer of BRG) of the Company, for total consideration of $635,000,
consisting of $435,000 in cash and $200,000 in a 6.5% interest, two-year
promissory note payable. Further, additional consideration of up to $700,000 may
be payable depending upon the audience levels delivered by PMW in the future.
The assets of PMW acquired by the Company consist principally of
intellectual properties and other intangible assets, including a library of over
6,000 jingles, third-party radio station affiliate broadcast contracts, and
copyrights. The Company did not assume any pre-acquisition accounts payable or
other obligations of PMW, except for certain commitments under real property and
equipment leases. The acquisition of PMW has been accounted for using the
purchase method of accounting.
On September 27, 1996 the Company amended and restated an August 29, 1995
agreement pursuant to which it had entered into future commitments to acquire
licenses to three (3) production music libraries from Canary Productions, Inc.
(Canary), which is wholly-owned by an employee of the Company. Under the amended
and restated agreement, the Company has entered into future commitments to
acquire a license to one (1) additional production music library, or four (4)
production music libraries in total, from Canary. The licenses to the production
music libraries will be acquired by the Company, one each year during the next
four years, for a purchase price that will be based upon a formula of a multiple
of earnings of each such library, payable in cash or shares of the Company's
Class A common stock. Subsequent to December 31, 1996, the Company acquired the
license to the first such library for a nominal amount.
The net purchase price of PMW was allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment............................. $ 10,000
Intellectual property..................................... 676,000
Other assets.............................................. 25,000
---------
$ 711,000
---------
---------
</TABLE>
The results of operations of PMW have been included in the consolidated
statement of income from the date of acquisition.
F-48
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
CUTLER PRODUCTIONS, INC. AND SJM PRODUCTIONS, INC. (CUTLER)
On October 1, 1996, the Company consummated an agreement pursuant to which
it acquired substantially all of the assets of Cutler Productions, Inc. and SJM
Productions, Inc. (collectively, Cutler) for consideration consisting of
$8,500,000 in cash.
The assets of Cutler acquired by the Company consist principally of
intellectual properties and other intangibles, including third-party radio
station affiliate broadcast contracts, a library of programs and program rights,
and copyrights. The Company did not assume any pre-acquisition accounts payable
or other obligations of Cutler, except for certain commitments under real
property and equipment leases. The acquisitions of Cutler has been accounted for
using the purchase method of accounting. Cutler's sole shareholder and Chief
Executive officer has been employed by the Company pursuant to a three year
employment agreement.
The net purchase price of Cutler was allocated as follows:
<TABLE>
<S> <C>
Property, plant and equipment.......................... $ 75,000
Intellectual property.................................. 8,736,000
Covenant not to compete................................ 100,000
Other assets........................................... 180,000
-----------
$ 9,091,000
-----------
-----------
</TABLE>
The results of operations of Cutler have been included in the consolidated
statement of income from the date of acquisition.
In connection with the acquisition of Cutler, the Company paid Archon
Communications Inc. (Archon) a fee of $100,000.
The following summarized, unaudited pro forma statements of operations give
effect to the acquisition of PMW and Cutler as if the acquisitions had occurred
at the beginning of each period presented and after giving effect to certain
adjustments, including the inclusion of PMW's and Cutler's operations during the
years ended December 31, 1996 and 1995. The summarized, unaudited pro forma
statements of income do not purport to be indicative of the results of
operations that actually would have resulted had the sale occurred on the date
indicated, and is not intended to be indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1996 1995
------------- -------------
(UNAUDITED)
<S> <C> <C>
Net operating revenue.......................................... $ 28,654,000 $ 22,689,000
Operating income............................................... 5,547,000 3,681,000
Net income..................................................... 2,774,000 2,516,000
Primary earnings per share..................................... $ 0.32 $ 0.45
Weighted average common and common equivalent shares
outstanding................................................... 8,929,954 6,105,494
</TABLE>
3. JOINT VENTURES
On May 28, 1993, the Company entered into an agreement with Mediabase, a
Michigan corporation, pursuant to which the Company and Mediabase formed a joint
venture to nationally syndicate the Monday
F-49
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. JOINT VENTURES (CONTINUED)
Morning Replay research service to radio stations principally throughout the
United States and Canada. The joint venture had commenced operations as
Mediabase Premiere Radio Networks (MPRN) and was 50% owned by each party, with
profits and losses shared equally. During the period May 28, 1993 through April
27, 1994, the Company accounted for this joint venture using the consolidation
method of accounting as it held a majority of the seats on the Executive
Committee and had management control of the joint venture.
Effective April 27, 1994, the Company acquired the remaining 50% share of
MPRN for $3,216,915, including transaction costs. The purchase price was
allocated to tangible equipment of $230,000 and $2,720,559 to intellectual
property (net of the carrying value of the minority interest of $266,356).
On March 20, 1995, the Company entered into a joint venture agreement with
Marketing/Research Partners, Inc. (MRPI) to nationally syndicate Newstrack
(Newstrack Joint Venture), a research service jointly developed by the Company
and MRPI. The Newstrack Joint Venture commenced operations on or about September
1, 1995.
In exchange for a 75% interest in the Newstrack Joint Venture, the Company
agreed to contribute $265,000 payable in four quarterly payments of $66,250
commencing on August 15, 1995, and advance certain commencement costs related to
the Newstrack Joint Venture. MRPI received a 25% interest in the Newstrack Joint
Venture for contributing computer systems and providing certain research
services for a one-year period.
The Company had the option to acquire MRPI's interest in the Newstrack Joint
Venture anytime after May 1, 1997 based upon a multiple of Newstrack's pre-tax
earnings, or at an earlier date based upon defined conditions. Effective
September 3, 1996, the Company acquired the remaining 25% minority interest from
MRPI for $303,188.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Office furniture and equipment.................................... $ 2,101,584 $ 1,758,283
Production and programming equipment.............................. 1,220,861 973,372
Leasehold improvements............................................ 799,449 445,417
------------ ------------
4,121,894 3,177,072
Less accumulated depreciation and amortization.................... 1,802,955 1,379,735
------------ ------------
$ 2,318,939 $ 1,797,337
------------ ------------
------------ ------------
</TABLE>
5. NOTES PAYABLE
On March 19, 1993, the Company entered into an agreement (as subsequently
amended) with Bank of America NT&SA (the Bank) whereby the Company obtained a
$2,200,000 term loan which was subsequently amended to $4,200,000 on July 15,
1994 and a $2,000,000 working capital line of credit which expired on May 15,
1996. Both loans were secured by substantially all the assets of the Company.
Outstanding borrowings were repaid in full in January 1996.
F-50
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. NOTES PAYABLE (CONTINUED)
In connection with the acquisition of BRG, the Company issued a $412,500
non-interest bearing note payable, due in January 1997. In connection with the
acquisition of PMW the Company issued a $200,000, 6 1/2% interest note payable
due in equal quarterly installments of principal and accrued interest over two
years (see Note 2).
6. COMMITMENTS AND CONTINGENCIES
The Company leases space for its office and production facilities under
operating leases expiring at various dates through 2000. Renewal options are
available on certain of these leases. Future minimum lease payments under
noncancelable operating leases, including amounts payable under barter
arrangements, at December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997................................................... $ 899,000
1998................................................... 734,000
1999................................................... 494,000
2000................................................... 458,000
2001................................................... --
-----------
$ 2,585,000
-----------
-----------
</TABLE>
Rental expense under operating leases was $671,585 in 1996, $453,248 in 1995
and $312,508 in 1994.
The Company is, from time to time, a party to various legal actions and
complaints arising in the ordinary course of business. In the opinion of the
Company's management, all such matters are without merit or involve amounts
which, in the event of unfavorable disposition, will not have a material impact
on the Company's financial position or results of operations.
7. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal........................................... $ 1,766,000 $ 1,577,000 $ 1,423,000
State............................................. 423,000 434,000 299,000
------------ ------------ ------------
2,189,000 2,011,000 1,722,000
Deferred:
Federal........................................... (384,000) (226,000) (287,000)
State............................................. (107,000) (64,000) (66,000)
------------ ------------ ------------
(491,000) (290,000) (353,000)
------------ ------------ ------------
$ 1,698,000 $ 1,721,000 $ 1,369,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax
F-51
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
purposes. Significant components of the Company's current deferred tax assets as
of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Accounts receivable allowance....................................... $ 121,000 $ 169,000
Deferred compensation............................................... 143,000 196,000
State income taxes.................................................. 65,000 50,000
Unrealized losses on securities..................................... 78,000 18,000
Deferred revenue.................................................... 706,000 33,000
Accrued expenses.................................................... 17,000 110,000
Other............................................................... 29,000 33,000
------------ ----------
Total............................................................... 1,159,000 609,000
Valuation allowance................................................. (60,000) (60,000)
------------ ----------
Net deferred tax assets............................................. $ 1,099,000 $ 549,000
------------ ----------
------------ ----------
</TABLE>
The effective tax rate varied from the statutory federal income tax rate as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal rate........................................... 34.0% 34.0% 34.0%
State and local taxes, net of federal tax benefit................ 5.1 5.2 4.6
Other items...................................................... 1.9 1.0 2.2
--------- --------- ---------
Effective income tax rate........................................ 41.0% 40.2% 40.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
8. BARTER ARRANGEMENTS
The Company exchanges otherwise perishable, unsold commercial broadcast time
for products and services. Net operating revenue includes $1,517,210 in 1996,
$1,337,809 in 1995 and $1,194,427 in 1994, representing the fair value of
products or services exchanged for broadcast time. Selling and general and
administrative expenses include the fair value of products and services utilized
of $1,010,906 in 1996, $956,661 in 1995 and $1,003,222 in 1994. Additions to
property and equipment through such transactions were $70,350 in 1996, $425,936
in 1995 and $187,342 in 1994.
Included in accounts payable, accrued expenses and other liabilities at
December 31, 1996 and 1995, is $159,686 and $193,729, respectively, representing
the fair value of goods and services owed by the Company to third parties under
noncancelable agreements for commercial time broadcast prior to December 31 of
the respective years.
9.RETIREMENT PLANS, EXECUTIVE BONUS POOL, EXECUTIVE LIFE INSURANCE AND EXECUTIVE
LOAN
The Company provides for retirement through a profit-sharing plan, as
subsequently amended into a qualified 401(k) savings retirement plan, and
through a non-qualified Supplemental Executive Retirement Plan (SERP).
The Company's 401(k) savings retirement plan covers all eligible employees.
Contributions were determined by the Board of Directors subject to maximum
limitations as provided in the Internal Revenue
F-52
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9.RETIREMENT PLANS, EXECUTIVE BONUS POOL, EXECUTIVE LIFE INSURANCE AND EXECUTIVE
LOAN (CONTINUED)
Code. Contributions by the Company made under the plan and included in the
accompanying statements of income were $58,800 in 1996, $69,000 in 1995 and
$80,000 in 1994.
Under the 401(k) savings retirement plan (401(k) Plan), all employees who
have completed one year of service or 1,000 hours of service in that year with
the Company are eligible to join the 401(k) Plan on January 1 or July 1 of any
given year. All eligible employees may contribute from 1% to 15% of their annual
compensation on a pre-tax basis subject to annual IRS limitations. The Company
makes matching contributions in an amount equal to 20% of the employee's
contributions up to 10% of their annual compensation. Matching contributions
made by the Company vest 20% per year beginning with the employee's first date
of eligibility and participation in the 401(k) Plan.
The Company has an Executive Bonus Pool under which bonuses are paid to
executives at the discretion of the Compensation Committee. Amounts recorded as
expense under the plan were $285,000 in 1996, $240,000 in 1995 and $170,000 in
1994.
Effective December 31, 1995, the Company adopted a SERP for 5% or more
stockholder/employees and certain designated executive officers of the Company.
Under the SERP, all eligible employees may defer up to 100% of their annual
compensation up to a maximum of $100,000 per year and earn interest on their
deferred amounts. The total participant deferrals, were $120,000 and $230,000
during the years ended December 31, 1996 and 1995, respectively.
During 1996, the Company entered into split-dollar life insurance agreements
with certain executives of the Company. Under the terms of the agreements, the
Company purchases life insurance policies on behalf of the executives that build
cash surrender value while also providing life insurance benefits for the
executives. The Company is entitled to a refund of all previously paid premiums
or the cash surrender value, whichever is lower. In the event of the death of
the executive, the Company will immediately be entitled to a refund of
previously paid premiums. The Company may terminate the agreements at any time
by giving written notice to the executive. At December 31, 1996, none of the
executive insurance policies had any cash surrender value in excess of
previously paid premiums.
As contemplated pursuant to the terms of an employment agreement, on
November 10, 1995, the Company loaned its Chief Executive Officer (the
Executive) $800,000, which is secured by 170,000 and 85,000 shares of the
Company's common stock and Class A common stock, respectively, owned by the
Executive. The loan is non-recourse and bears interest, payable quarterly, at
the Bank's Reference Rate, as announced on the first day of each quarter. The
loan is payable on the earlier of July 28, 1999, or such date as the Executive
ceases full-time employment with the Company (or, if the Company terminates such
employment without cause, one year thereafter). Not less than 70% of the net
proceeds of the sale by the Executive of any pledged shares and 25% of the net
proceeds of sale of any other Company shares owned by the Executive shall be
applied to repayment of the loan. The number of pledged shares will be reduced
proportionately in the event of partial principal payments on the loan, provided
that no collateral would be released to the extent the fair market value or the
collateral remaining as security is less than 200% of the outstanding principal
amount. During 1996, the executive repaid $197,664 in principal.
F-53
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. DEBT AND EQUITY PLACEMENT
On July 26, 1995, the Company's stockholders approved, and on July 28, 1995
(Closing Date), the Company consummated, various agreements including the
Securities Purchase Agreement with Archon pursuant to which Archon provided to
the Company standby commitments (Commitment Agreements) to purchase up to
$10,800,000 of subordinated debentures (Debentures) and purchased from the
Company 750,000 shares of common stock and 1,221,750 Class B warrants (659,250
warrants were placed in escrow to be released to Archon pro rata if Debentures
were issued by the Company or upon termination of the commitments, whichever
came first) for aggregate cash consideration of $4,025,000. The Debentures were
issuable in units consisting of $1,000 principal amount of Debentures and 150
detachable Class A warrants exercisable at $7.00 per share (an aggregate or up
to 1,620,000 detachable Class A warrants were issuable). The Debentures were
issuable at the Company's call through October 28, 1996. In the event the
Company did not exercise its call rights with respect to the Debentures, Archon
was still entitled to receive 1,060,500 of the Class A warrants.
On the Closing Date, the Company paid Archon a commitment fee of $108,000
for executing the Commitment Agreements and $40,000 representing the first of
five annual installments for providing standby commitments to purchase the
Debentures. The Company was also obligated to pay Archon a facility fee equal to
0.30% per quarter of the average principal amount of the unused subordinated
debentures which facility fee was waived by Archon effective January 1, 1996. In
addition, the Company paid $204,000 directly to or on behalf of Archon for legal
and professional fees and expenses incurred by Archon in connection with these
transactions.
All of the securities, including the Debentures, common stock and warrants,
have certain registration and piggyback rights.
Under the Securities Purchase Agreement, Archon and the Company's principal
stockholders and executive officers (the Insiders) have entered into a
Stockholders' Agreement. Under the Stockholders' Agreement, the Insiders and
Archon have entered into a Voting Trust Agreement pursuant to which Archon has
contributed 500,000 shares of common stock and 250,000 shares of Class A common
stock and the Insiders have contributed 1,288,624 shares of common stock, and
644,312 shares of Class A common stock. Through the Voting Trust Agreement,
Archon has received proxies which will enable it to effectuate 50% control of
the voting trust shares and 50% of the shares of Insiders not in the voting
trust. In addition, Archon received three seats on the eight-member board of
directors and the right to designate two outside directors.
During January 1996, the Company completed the sale of 1,500,000 shares of
Class A common stock at $18.25 per share (after giving effect to the Stock
Dividend, holders received 2,250,000 shares of Class A common stock from this
sale) pursuant to a follow-on public offering and received net proceeds of
$22,049,000 (net of underwriting discounts, commissions and expenses). Included
in prepaid expenses and other assets at December 31, 1995, is approximately
$511,000 representing expenses incurred in connection with the public offering.
In connection with this offering, the Company paid Archon a fee of $200,000.
11. WRITE-OFF OF DEBT ISSUANCE COSTS AND OTHER CHARGES
The Company recorded, as debt issuance costs, the value of the 1,060,500
Class A warrants which were issuable to Archon whether or not the Company
exercised its call rights with respect to the Debentures, commitment fees,
legal, professional and other costs directly related to the Debentures
F-54
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. WRITE-OFF OF DEBT ISSUANCE COSTS AND OTHER CHARGES (CONTINUED)
(Note 10). Because the Company did not call on Archon to purchase the Debentures
by October 28, 1996, the Company wrote off the then remaining unamortized debt
issuance costs which resulted in a one-time earnings charge during the fourth
quarter of 1996 of $1,949,120.
In connection with attempted business acquisitions and the assimilation of
completed business acquisitions (Note 2) during the year ended December 31,
1996, the Company incurred professional fees, severance, transition and other
costs. The costs which aggregated $417,045 were charged to expense in the 1996
statement of income.
12. STOCKHOLDERS' EQUITY
In connection with the Company's initial public offering on May 5, 1992, the
Company issued warrants for 100,000 shares of common stock (and up to 50,000
shares of Class A common stock after giving effect to the Stock Dividend) (such
number of warrants are subject to adjustment under certain conditions) to the
underwriter that are exercisable through April 28, 1997. At December 31, 1996,
warrants for 52,667 and 27,334 shares of common stock and Class A common stock,
respectively, at an exercise price of $4.31 per share were outstanding.
The Company purchased 1,000 shares of common stock and 186,600 shares of
Class A common stock in 1996 at an aggregate cost of $1,950,398. At December 31,
1996 the Company had remaining authorization under its stock repurchase program
to acquire up to an aggregate value of $1,049,602 of either class of its common
stock.
As a condition, among others, to the consummation of the Securities Purchase
Agreement (Note 10), the Company reincorporated from the State of California to
the State of Delaware. Upon completion of the reincorporation, each outstanding
share of the Company's common stock, no par value, was converted into one share
of common stock, $.01 par value of the Delaware corporation. In addition, the
authorized capital stock of the Delaware corporation was expanded to include
14,000,000 shares of Class A common stock, $.01 par value, and 5,000,000 shares
of "blank check" preferred stock, $.01 par value. The common stock and Class A
common stock are identical in all respects except that each share of common
stock will be entitled to one vote and Class A common stock will be entitled to
one-tenth vote on all matters submitted to stockholders.
In August 1996, the Company's stockholders approved an amendment to the
Certificate of Incorporation of the Company which provided that (a) each share
of common stock is entitled to ten votes per share and each share of Class A
common stock is entitled to one vote per share, (b) each share of common stock
is convertible into one share of Class A common stock at the option of the
holder thereof, (c) that the Company may not treat the common stock and Class A
common stock differently (except for voting rights) in any merger,
reorganization, recapitalization or similar transaction or support a tender
offer which attempts to do so, and (d) the authorized number of shares of common
stock and Class A common stock be increased to 14,000,000 and 20,000,000 shares,
respectively.
13. STOCK OPTION PLANS
On May 5, 1992, the Company established the 1992 Stock Option Plan (1992
Plan) pursuant to which 547,207 and 221,029 shares of common stock and Class A
common stock, respectively, have been reserved for issuance under the 1992 Plan.
All options were granted at no less than the fair market value of the shares on
the date of grant (or 110% of fair market value, in the case of persons owning
10% or more of
F-55
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK OPTION PLANS (CONTINUED)
the Company's stock on the date of grant). On July 26, 1995, the Company's
stockholders approved the Company's 1995 Stock Option Plan (1995 Plan) pursuant
to which additional options for 1,113,887 Class A common stock have been
reserved for future issuance.
The Company's 1992 Plan and 1995 Plan have certain anti-dilution provisions.
As a result of the Stock Dividend, options authorized, granted and outstanding
on the record date of the Stock Dividend were adjusted accordingly. At December
31, 1996, an aggregate of 1,722,438 options have been granted under the
Company's stock option plans and 898,115 options were vested and exercisable.
The Company has elected to follow APB 25 (Note 1) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under SFAS 123, requires use of option valuation models
that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS 123. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for each of
the years ended December 31, 1996 and 1995: risk-free interest rates ranging
from 5.5% to 6.5%; volatility factors of the expected market price of the
Company's common stock of 0.551; and a weighted-average expected life of the
options ranging from 1 to 5 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Given this
method of amortization, the initial impact of applying SFAS 123 on pro forma net
income and pro forma earnings per share is not representative of the potential
impact on pro forma amounts in future years, when the effect of amortization
from multiple awards would be reflected. The Company's pro forma information
follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Pro forma net income.............................................. $ 1,221,832 $ 2,691,289
Pro forma earnings per share...................................... $ 0.13 $ 0.37
</TABLE>
F-56
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. STOCK OPTION PLANS (CONTINUED)
The following is a summary of stock options granted, exercised and
terminated through December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............ 910,873 $ 6.18 755,323 $ 4.64 727,601 $ 4.63
Granted..................................... 643,500 $ 10.50 264,375 $ 9.90 63,750 $ 4.73
Exercised................................... (95,230) $ 4.32 (108,825) $ 4.52 (16,250) $ 4.76
Forfeited................................... (39,653) $ 6.78 -- -- (19,778) $ 4.63
---------- ----------- ---------- ----- ---------- -----
Outstanding at end of year.................. 1,419,490 $ 8.24 910,873 $ 6.18 755,323 $ 4.64
---------- ----------- ---------- ----- ---------- -----
---------- ----------- ---------- ----- ---------- -----
Exercisable at end of year.................. 898,115 $ 6.83 806,370 $ 5.10 701,063 $ 4.72
---------- ----------- ---------- ----- ---------- -----
---------- ----------- ---------- ----- ---------- -----
Weighted average fair value of options
granted during year........................ $ 5.11 $ 3.76
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$3.83 to $20.00. The weighted average remaining contractual life of those
options is 3.6 years. Options vest over a period of two or five years from
respective grant dates.
At December 31, 1996, the Company had outstanding, other than the Class A
warrants and Class B warrants (Note 10), and the warrants issued to an
underwriter in connection with its initial public offering (Note 12), 52,500 and
26,250 warrants to purchase common stock and Class A common stock issued to a
company controlled by a director of the Company, respectively, at an exercise
price of $5.17 per share, and 135,000 warrants to purchase Class A common stock
at $8.67 per share issued to certain current and former directors of the
Company.
During October 1996 the Company granted 60,000 options to an affiliate of
Archon at an exercise price of $11.00 per share.
14. NOTE RECEIVABLE
On November 15, 1995, the Company loaned $500,000 to Major Networks, Inc.
(Major) secured by certain of Major's accounts receivable and five sports
programs. The loan does was noninterest bearing and was payable from proceeds of
accounts receivable collected by the Company under the terms of a sales
representation agreement. During 1996, the loan was repaid.
15. INVESTMENTS
During November 1996 the Company acquired 5% of the outstanding common
shares of Audionet, Inc. (Audionet) for $4,000,028 in cash. The investment which
is available for sale is being carried at fair value (approximates cost at
December 31, 1996). Under separate agreements, Audionet has retained the Company
as Audionet's exclusive network radio sales representative, and has paid to the
Company an advance of $2,000,000 towards Audionet's commitment to purchase
network radio advertising from the Company over a two-year period. At December
31, 1996 the Company has recorded $1,766,800 of deferred revenue representing
the unrecognized amount of the advance paid by Audionet.
F-57
<PAGE>
PREMIERE RADIO NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. INVESTMENTS (CONTINUED)
Also, included in investments at December 31, 1996 is $215,240 representing
the estimated fair value of third-party common stock acquired in exchange for
commercial time broadcast prior to December 31, 1996. At December 31, 1996, an
unrealized loss of $150,112, which was offset by deferred income taxes of
$60,000, was charged to stockholders' equity.
16. SUBSEQUENT EVENT--ACQUISITION OF AFTER MIDNITE ENTERTAINMENT, INC.
Effective on January 7, 1997, pursuant to an Agreement and Plan of Merger By
and Among the Company, After MidNite Entertainment, Inc. (AME) and the
Shareholders of AME dated as of January 1, 1997 (Merger Agreement), a
wholly-owned merger subsidiary of the Company acquired 100% of the outstanding
shares of AME for consideration consisting of $3,900,000 cash and 400,000 shares
of the Company's Class A common stock. Under the terms of the Merger Agreement,
the Company has agreed to pay additional consideration either in cash or
additional shares of Class A common stock, at its option, if the market value of
the Class A common stock is less than $16.00 per share one year from the closing
date of the transaction.
Pursuant to the terms of the Merger Agreement, the sellers assumed
responsibility for all pre-acquisition accounts payable or other obligations of
AME, except for certain commitments under real property and equipment leases. In
addition, the sellers retained AME's pre-Closing accounts receivable and cash
balances as of the closing date of the transaction. The acquisition of AME will
be accounted for by the Company as a purchase.
In connection with the AME acquisition, the Company entered into various
agreements with a former shareholder of AME, whereby, among other things, the
Company paid the shareholder a transaction fee in the amount of $500,000. In
addition, the Company has agreed to retain the shareholder under a two-year
consulting agreement and the shareholder was nominated to the Company's Board of
Directors in January 1997.
17.SUBSEQUENT EVENT (UNAUDITED)--SALE OF 100% OF THE COMPANY'S COMMON STOCK TO
JACOR COMMUNICATIONS, INC.
On April 7, 1997, the Company announced that it had signed a definitive
merger agreement with Jacor Communications, Inc. (Jacor) pursuant to which Jacor
will acquire 100% of the outstanding common stock, Class A common stock and
common stock equivalents of the Company for cash and stock valued at
approximately $185 million or approximately $18 per share, consisting of $13.50
in cash with the balance in Jacor common stock. The acquisition price is subject
to adjustment in certain circumstances. Actual closing of the merger transaction
is subject to regulatory review, including the expiration of the applicable
Hart-Scott-Rodino waiting period, and other customary closing considerations.
F-58
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Secret Communications Limited Partnership:
We have audited the accompanying combined balance sheet of WLTF/WTAM,
CLEVELAND, as further described in Note 1, as of December 31, 1996, and the
related combined statement of operations and cash flows for the year then ended.
These financial statements are the responsibility of the Stations' management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the accompanying combined financial statements referred to
above present fairly, in all material respects, the financial position of
WLTF/WTAM, CLEVELAND as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
CHICAGO, ILLINOIS,
JULY 11, 1997
F-59
<PAGE>
WLTF/WTAM, CLEVELAND
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------- MARCH 31,
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 2,000 $ 2,000
Accounts receivable (net of allowance for doubtful accounts of $100,000 and
$86,035 respectively).......................................................... 2,156,463 1,493,312
Trade receivables................................................................ 73,495 99,109
Prepaid expenses................................................................. 131,633 182,274
------------- -------------
Total current assets........................................................... 2,363,591 1,776,695
------------- -------------
PROPERTY AND EQUIPMENT, net (note 3)............................................... 1,274,235 1,224,815
INTANGIBLE ASSETS, net (note 4).................................................... 14,668,620 14,460,764
------------- -------------
TOTAL ASSETS....................................................................... $ 18,306,446 $ 17,462,274
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable and accrued expenses............................................ $ 618,078 $ 552,755
Trade payables................................................................... 51,416 41,956
Interest payable................................................................. 27,960 7,555
Current maturities of long-term debt............................................. 481,671 565,294
------------- -------------
Total current liabilities...................................................... 1,179,125 1,167,560
------------- -------------
LONG-TERM DEBT, less current maturities (note 6)................................... 7,122,586 7,038,963
COMMITMENTS AND CONTINGENCIES (note 7)
PARTNERS' CAPITAL AND STATION EQUITY
Balance, beginning of period..................................................... 10,898,135 10,004,735
Net amounts transferred to central office........................................ (1,766,949) (412,915)
Contributed capital.............................................................. 1,278,815 291,831
Net loss for the period.......................................................... (405,266) (627,900)
------------- -------------
Balance, end of period........................................................... 10,004,735 9,255,751
------------- -------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL............................................ $ 18,306,446 $ 17,462,274
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-60
<PAGE>
WLTF/WTAM, CLEVELAND
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996
------------- THREE MONTHS ENDED MARCH
31,
1995 --------------------------
------------- 1996 1997
(UNAUDITED) ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Advertising revenues................................. $ 10,751,100 $ 11,032,379 $ 2,086,515 $ 2,043,283
Less: agency commissions............................. 1,336,435 1,312,799 248,821 236,713
------------- ------------- ------------ ------------
Net revenues....................................... 9,414,665 9,719,580 1,837,694 1,806,570
------------- ------------- ------------ ------------
OPERATING EXPENSES:
Station operating expenses excluding depreciation and
amortization....................................... 7,534,324 7,774,873 2,085,247 1,775,698
Depreciation and amortization........................ 1,154,579 1,054,304 265,453 278,445
Central office general and administrative (note 8)... 644,383 712,779 145,558 243,922
------------- ------------- ------------ ------------
Operating expenses................................. 9,333,286 9,541,956 2,496,258 2,298,065
------------- ------------- ------------ ------------
OPERATING INCOME....................................... 81,379 177,624 (658,564) (491,495)
NONOPERATING EXPENSES:
Interest expense (note 6)............................ 637,461 540,390 134,722 125,780
------------- ------------- ------------ ------------
Non operating expenses............................. 637,461 540,390 134,722 125,780
------------- ------------- ------------ ------------
Income before taxes.................................... (556,082) (362,766) (793,286) (617,275)
Provision for state income taxes (note 2).............. 44,646 42,500 10,625 10,625
------------- ------------- ------------ ------------
Net loss........................................... $ (600,728) $ (405,266) $ (803,911) $ (627,900)
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-61
<PAGE>
WLTF/WTAM, CLEVELAND
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 (UNAUDITED) AND 1996
AND THE THREE MONTH PERIOD ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996
------------- THREE MONTHS ENDED MARCH
31,
1995 ------------------------
------------ 1996 1997
(UNAUDITED) ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ ($ 600,728) ($ 405,266) ($803,911) ($627,900)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 1,154,579 1,054,304 265,453 278,445
(Gain) loss on disposal of equipment.................. (40,429) 18,390 -- 4,300
Changes in assets and liabilities:
Decrease (increase) in receivables, net............. 125,556 (92,185) 638,295 637,537
(Increase) decrease in prepaid expenses............. (81,989) 50,272 (8,782) (50,641)
(Decrease) increase in payables and accrued
expenses.......................................... (249,412) 120,864 (32,089) (74,783)
(Decrease) increase in interest payable............. (75,998) 8,451 14,259 (20,405)
------------ ------------- ----------- -----------
Net cash provided by operating activities......... 231,579 754,830 73,225 146,553
------------ ------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (327,957) (151,713) (14,724) (25,469)
Proceeds from sale of equipment......................... 82,700 -- -- --
Acquisition of call letters............................. -- (14,487) -- --
------------ ------------- ----------- -----------
Net cash (used in) investing activities........... (245,257) (166,200) (14,724) (25,469)
------------ ------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in amounts transferred to central office..... (1,388,809) (1,766,949) (335,149) (412,915)
Net (payments) of long-term debt........................ (960,303) (100,496) (100,496) --
Capital contributions................................... 2,362,790 1,278,815 377,144 291,831
------------ ------------- ----------- -----------
Net cash provided by (used in) financing
activities...................................... 13,678 (588,630) (58,501) (121,084)
------------ ------------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................. -- -- -- --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......... 2,000 2,000 2,000 2,000
------------ ------------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 2,000 $ 2,000 $ 2,000 $ 2,000
------------ ------------- ----------- -----------
------------ ------------- ----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-62
<PAGE>
WLTF/WTAM, CLEVELAND
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) BUSINESS AND BASIS OF PRESENTATION:
Secret Communications Limited Partnership ("Secret") owns WLTF-FM and
WTAM-AM (the "Stations"). The Stations are licensed to and serve Cleveland,
Ohio. The accompanying combined financial statements include the accounts of the
Stations after eliminating all significant intercompany accounts and
transactions.
Secret was formed in 1994 and on August 1, 1994, the general partners of
Secret contributed substantially all of the assets and debt of several radio
stations to Secret. The Stations were among those included in this initial
contribution.
As further described in Note 5, Secret entered into an agreement to sell
substantially all of the assets of the Stations to Jacor Broadcasting
Corporation ("Jacor").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) CASH EQUIVALENTS
Cash equivalents include overnight repurchase agreements backed by United
States securities.
(b) TRADE AGREEMENTS
The Stations have entered into trade agreements which provide for the
exchange of advertising time for merchandise or services and are recorded at the
estimated fair market value of the goods or services to be received. Trade
receivables and trade payables represent the outstanding obligations of the
parties to the trade agreements as of the end of the year. Trade revenues are
recognized as the advertisements are broadcast. Trade expenses are recognized as
the services or merchandise is used.
(c) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense when
incurred.
(d) INTANGIBLE ASSETS
Intangible assets are recorded at their appraised values and are amortized
using the straight-line method over estimated periods of benefit up to 40 years.
Should events or circumstances occur subsequent to the acquisition of a station
which bring into question the realizable value or impairment of the related
goodwill and intangibles, Secret will evaluate the remaining useful life and
balance of intangibles and make appropriate adjustments. Secret's principal
considerations in determining impairment include the strategic benefit to Secret
of the particular station and the current and expected future operating income
and cash flow levels of that particular station.
(e) REVENUE RECOGNITION
Advertising revenues are recognized as advertisements are broadcast.
F-63
<PAGE>
WLTF/WTAM, CLEVELAND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(g) INCOME TAXES
The accompanying combined financial statements do not reflect provisions for
federal income taxes which are reported by the partners of Secret. The income
taxes reported in the accompanying statements of operations are Cleveland city
income taxes paid by the Partnership instead of the partners.
(h) STATEMENT OF CASH FLOWS
Cash of $531,939 was paid for interest during the year ended December 31,
1996. Cash of $47,000 was paid for local income taxes during the year ended
December 31, 1996.
(i) USE OF ESTIMATES
The preparation of these combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED
1996 USEFUL LIVES
------------ -------------
<S> <C> <C>
Buildings and leasehold improvements............................. 625,098 5 - 10 years
Broadcasting equipment........................................... 715,473 5 - 15 years
Furniture and fixtures........................................... 195,654 5 years
Business equipment............................................... 207,133 5 years
Vehicles......................................................... 162,645 5 years
------------
1,906,003
Less: Accumulated depreciation................................... (631,768)
------------
$ 1,274,235
------------
------------
</TABLE>
F-64
<PAGE>
WLTF/WTAM, CLEVELAND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(4) INTANGIBLE ASSETS:
Intangible assets consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
1996 LIVES
------------- -----------
<S> <C> <C>
FCC Licenses...................................................... $ 14,360,546 25 years
Network Contract.................................................. 912,879 10 years
Advertiser Relationships.......................................... 1,111,154 7 years
Call Letters...................................................... 14,487 10 years
Goodwill.......................................................... 279,253 40 years
-------------
16,678,319
Less: Accumulated amortization.................................... (2,009,699)
-------------
$ 14,668,620
-------------
-------------
</TABLE>
(5) SALE OF STATIONS:
On April 24, 1997, Secret entered into a definitive agreement to sell
substantially all of the assets of the Stations to Jacor. The assets sold
included fixed assets and intangible assets. In addition, Secret entered into a
noncompete agreement covering the Cleveland market for one year. In
consideration for the assets of the Stations and the noncompete agreement, Jacor
will pay Secret $23,968,750 in cash plus 750,000 shares of common stock of Jacor
Communications, Inc. on the closing date. While this transaction is pending,
Secret has entered into a time brokerage agreement with respect to the Stations
which allows Jacor to purchase substantially all of the broadcast time on the
Stations. The agreement commenced June 1, 1997 and will expire on the closing
date.
The Stations agreed to pay bonuses to certain executives and key employees
if the individuals were employed by the Stations upon the close of the sale.
These bonuses are accrued ratably from the commitment date, October 1, 1996,
through the estimated close date, July 31, 1997. At December 31, 1996, $108,900
is accrued for these stay bonuses, with the related expense reflected in central
office general and administrative expenses.
(6) LONG-TERM DEBT:
Long-term debt consisted of a senior reducing revolving credit facility at
December 31, 1996, which was used to recapitalize debt and to fund working
capital for Secret at August 1, 1994. The debt was allocated to the Stations
based on the ratio of the Stations' fair market value as compared to the total
fair market value of Secret at August 1, 1994. Additional borrowings and
repayments were allocated based on the same ratio if these borrowings and
repayments were related to the general operations of all the Secret stations.
Interest expense for the year ended December 31, 1996, was allocated to the
Stations based on the same ratio.
Borrowings under the revolving loans bear interest, at the option of Secret
at LIBOR or prime, plus a margin. The margin over LIBOR or prime varies from
time to time depending on Secret's ratio of debt to cash flow as defined in the
agreement. The interest rate on the reducing revolver at December 31, 1996,
ranged from 7.00% to 8.50%, with a weighted average interest rate of 7.10%.
F-65
<PAGE>
WLTF/WTAM, CLEVELAND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(6) LONG-TERM DEBT: (CONTINUED)
Amounts outstanding under the reducing revolver are payable in quarterly
installments beginning as early as June 30, 1995, and ending December 31, 2001.
The amounts payable depend on the amounts then outstanding and correspondingly
reduce the amount available to be borrowed. Based on debt outstanding, there
were no amortization payments required to be made in 1996. Amounts outstanding
under the revolving credit/term loan convert on June 30, 1997, to a term loan
payable in quarterly installments ending December 31, 2001. In addition to
scheduled amortization, Secret is required to repay revolving credit borrowings
each calendar year of up to 50% of the excess cash flow for that calendar year
as defined in the agreement, commencing with the year ending December 31, 1995.
Based on financial ratios at December 31, 1996, there is no excess cash flow
repayment due in 1997.
The senior credit facility limits indebtedness, capital expenditures, and
payment of distributions and requires certain financial ratios to be maintained
among other restrictions. At December 31, 1996, Secret was in compliance with
all provisions of its credit agreement. The senior credit facility is secured by
substantially all of the assets of Secret.
The future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997............................................................ $ 481,671
1998............................................................ 1,357,903
1999............................................................ 1,614,111
2000............................................................ 1,870,319
2001............................................................ 2,280,253
---------
$7,604,257
---------
---------
</TABLE>
The fair value of the debt is equal to its carrying value.
On April 1, 1997, Secret repaid all amounts outstanding under its senior
credit facility.
(7) COMMITMENTS AND CONTINGENCIES:
The Stations have entered into operating leases with initial or remaining
non-cancelable terms in excess of one year. The future minimum rental payments
required for all such leases as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- --------------------------------------------------------------------------------
<S> <C>
1997.......................................................................... $ 292,428
1998.......................................................................... 243,860
1999.......................................................................... 252,930
2000.......................................................................... 240,202
2001.......................................................................... 175,379
------------
Total minimum payments required................................................. $ 1,204,799
------------
------------
</TABLE>
Rent expense was $290,704 for the year ended December 31, 1996.
F-66
<PAGE>
WLTF/WTAM, CLEVELAND
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(8) RELATED PARTY TRANSACTIONS:
Central office general and administrative expenses represent an allocation
of charges incurred by Secret's headquarters for various administrative and
management services, including, but not limited to, salaries, bonuses,
management fees and service fees. The charges are allocated to the Stations
based on the total number of markets in which Secret owns stations. Amounts
charged to the Stations do not necessarily represent the amounts that would have
been incurred had the Stations operated as an unaffiliated entity. However,
management believes that these charges result in a reasonable level of general
and administrative expenses for the Stations.
Included in the central office general and administrative expenses are fees
charged to Secret by the two general partners for management and consulting
services provided to Secret. In addition, Lane Industries, Inc., a related party
to the administrative general partner of Secret, provides certain tax, legal,
financial, risk management and employee benefits services for an annual fee. The
amount allocated to the Stations for all such services provided by the general
partners amounted to $180,405 for the year ended December 31, 1996.
As described in Note 6, a portion of Secret's senior debt and interest
expense has been allocated to the Stations as of December 31, 1996, and for the
year then ended.
The Partners' Capital and Station Equity section of the Balance Sheet
consists of intercompany accounts, capital contributed by the partners and
retained earnings. These accounts reflect the original acquisition of the
Stations and the activity between the Stations and Secret, such as cash
transfers and expense allocations.
(9) DEFERRED SAVINGS PLAN:
Secret maintains a 401(k) savings plan in which the employees of the
Stations participate. Employees must have reached age 21 and have completed one
year of consecutive service to participate in the plan. Employees may contribute
up to 15% of their salaries in accordance with IRS limitations. Secret matches
employee contributions at a rate of 75% (up to 6%) of the employee's salary.
Secret's contribution to the plan related to the Stations was $82,269 for the
year ended December 31, 1996.
(10) NOTE TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited interim combined financial statements have been
prepared in accordance with generally accepted accounting practices for interim
periods. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. It is suggested that these interim combined financial statements be
read in conjunction with the financial statements and notes thereto.
In the opinion of management, the unaudited interim combined financial
statements reflect all adjustments consisting of normal recurring adjustments
necessary to present fairly the combined financial position of the Stations as
of March 31, 1997, and the interim combined results of operations and cash flows
for all periods presented.
F-67
<PAGE>
ANNEX I
ASSETS PURCHASE AGREEMENT
BY AND BETWEEN
JACOR BROADCASTING CORPORATION (BUYER)
AND
SECRET COMMUNICATIONS LIMITED PARTNERSHIP (SELLER)
(omitting schedules and exhibits
not deemed material)
A-I-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
ARTICLE 1
PURCHASE OF ASSETS.................................................................................... A-I-6
1.1 Transfer of Assets......................................................................... A-I-6
1.2 Excluded Assets............................................................................ A-I-8
ARTICLE 2
ASSUMPTION OF OBLIGATIONS............................................................................. A-I-8
2.1 Assumption of Obligations.................................................................. A-I-8
2.2 Retained Liabilities....................................................................... A-I-8
ARTICLE 3
CONSIDERATION......................................................................................... A-I-9
3.1 Delivery of Consideration.................................................................. A-I-9
3.2 Proration of Income and Expenses........................................................... A-I-9
3.3 Allocation of Purchase Price............................................................... A-I-10
3.4 Subdivision of Stock....................................................................... A-I-10
ARTICLE 4
CLOSING............................................................................................... A-I-10
4.1 Closing.................................................................................... A-I-10
4.2 Time Brokerage Agreement................................................................... A-I-10
ARTICLE 5
GOVERNMENTAL CONSENTS................................................................................. A-I-11
5.1 FCC Consent................................................................................ A-I-11
5.2 FCC Application............................................................................ A-I-11
5.3 HSR Application............................................................................ A-I-11
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER............................................................... A-I-11
6.1 Organization and Standing.................................................................. A-I-11
6.2 Authorization and Binding Obligation....................................................... A-I-11
6.3 Qualification.............................................................................. A-I-12
6.4 Absence of Conflicting Agreements or Required Consents..................................... A-I-12
6.5 Litigation................................................................................. A-I-12
6.6 Commissions or Finder's Fees............................................................... A-I-12
6.7 Issuance of Shares......................................................................... A-I-12
6.8 Information Supplied for Registration Statement............................................ A-I-12
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER.............................................................. A-I-13
7.1 Organization and Standing.................................................................. A-I-13
7.2 Authorization and Binding Obligation....................................................... A-I-13
7.3 Absence of Conflicting Agreements or Required Consents..................................... A-I-13
7.4 Government Authorizations.................................................................. A-I-13
7.5 Compliance with FCC Regulations............................................................ A-I-14
7.6 Taxes...................................................................................... A-I-14
7.7 Personal Property.......................................................................... A-I-15
7.8 Real Property.............................................................................. A-I-15
7.9 Contracts.................................................................................. A-I-16
7.10 Status of Contracts, etc................................................................... A-I-16
</TABLE>
A-I-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
7.11 Environmental.............................................................................. A-I-16
7.12 Intellectual Property...................................................................... A-I-16
7.13 Financial Statements....................................................................... A-I-17
7.14 Personnel Information...................................................................... A-I-17
7.15 Litigation................................................................................. A-I-17
7.16 Compliance With Laws....................................................................... A-I-18
7.17 Employee Benefit Plans..................................................................... A-I-18
7.18 Commissions or Finder's Fees............................................................... A-I-18
7.19 Conduct of Business in Ordinary Course: Adverse Change..................................... A-I-18
7.20 Intentionally Deleted...................................................................... A-I-18
7.21 Undisclosed Liabilities.................................................................... A-I-18
7.22 Full Disclosure............................................................................ A-I-18
7.23 Insurance.................................................................................. A-I-18
7.24 Information Supplied for Registration Statement............................................ A-I-19
ARTICLE 8
COVENANTS OF BUYER.................................................................................... A-I-19
8.1 Closing.................................................................................... A-I-19
8.2 Notification............................................................................... A-I-19
8.3 No Inconsistent Action..................................................................... A-I-19
8.4 Accounts Receivable........................................................................ A-I-19
8.5 Adequate Current Public Information........................................................ A-I-20
ARTICLE 9
COVENANTS OF SELLER................................................................................... A-I-20
9.1 Seller's Pre-Closing Covenants............................................................. A-I-20
9.2 Notification............................................................................... A-I-22
9.3 No Inconsistent Action..................................................................... A-I-22
9.4 Closing.................................................................................... A-I-22
9.5 Other Items................................................................................ A-I-22
9.6 Exclusivity................................................................................ A-I-22
9.7 Intentionally Deleted...................................................................... A-I-23
9.8 Seller's Rule 145 Affiliates............................................................... A-I-23
9.9 Construction Permit. BP-960711AA........................................................... A-I-23
ARTICLE 10
JOINT COVENANTS....................................................................................... A-I-23
10.1 Confidentiality............................................................................ A-I-23
10.2 Cooperation................................................................................ A-I-23
10.3 Control of Station......................................................................... A-I-24
10.4 Consents to Assignment..................................................................... A-I-24
10.5 Filings.................................................................................... A-I-24
10.6 Bulk Sales Laws............................................................................ A-I-24
10.7 Employee Matters........................................................................... A-I-24
10.8 Seller Registration Statement.............................................................. A-I-25
10.9 Registration Agreement..................................................................... A-I-25
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER........................................................................ A-I-25
11.1 Representations, Warranties and Covenants.................................................. A-I-25
11.2 Governmental Consents...................................................................... A-I-26
11.3 Governmental Authorizations................................................................ A-I-26
</TABLE>
A-I-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
11.4 Adverse Proceedings........................................................................ A-I-26
11.5 Third-Party Consents....................................................................... A-I-26
11.6 Closing Documents.......................................................................... A-I-26
11.7 Environmental Audit........................................................................ A-I-26
11.8 Title Insurance and Surveys................................................................ A-I-26
11.9 Real Estate................................................................................ A-I-26
11.10 No Adverse Change.......................................................................... A-I-27
11.11 Board and Bank Consent..................................................................... A-I-27
11.12 Time Brokerage Agreement Compliance........................................................ A-I-27
11.13 Effectiveness of Registration Statement.................................................... A-I-27
11.14 WLTF(FM) Tower and Transmitter Lease....................................................... A-I-27
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER....................................................................... A-I-27
12.1 Representations, Warranties and Covenants.................................................. A-I-27
12.2 Governmental Consents...................................................................... A-I-27
12.3 Adverse Proceedings........................................................................ A-I-28
12.4 Closing Documents.......................................................................... A-I-28
12.5 Effectiveness of Registration Statement.................................................... A-I-28
12.6 Registration Agreement..................................................................... A-I-28
12.7 Buyer's Conditions......................................................................... A-I-28
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES..................................................................... A-I-28
13.1 Expenses................................................................................... A-I-28
13.2 Title and Transfer Taxes and Similar Charges............................................... A-I-28
13.3 Governmental Filing or Grant Fees.......................................................... A-I-28
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING.................................................................. A-I-28
14.1 Seller's Documents......................................................................... A-I-28
14.2 Buyer's Documents.......................................................................... A-I-29
ARTICLE 15
SURVIVAL; INDEMNIFICATION; ETC........................................................................ A-I-30
15.1 Survival of Representations, Etc........................................................... A-I-30
15.2 Indemnification............................................................................ A-I-30
15.3 Procedures: Third Party and Direct Indemnification Claims.................................. A-I-31
ARTICLE 16
TERMINATION RIGHTS.................................................................................... A-I-32
16.1 Termination................................................................................ A-I-32
16.2 Liability.................................................................................. A-I-32
16.3 Monetary Damages, Specific Performance and Other Remedies.................................. A-I-32
16.4 Seller's Damages........................................................................... A-I-32
ARTICLE 17
MISCELLANEOUS PROVISIONS.............................................................................. A-I-33
17.1 Risk of Loss............................................................................... A-I-33
17.2 Certain Interpretive Matters and Definitions............................................... A-I-33
17.3 Further Assurances......................................................................... A-I-33
17.4 Benefit and Assignment..................................................................... A-I-33
17.5 Amendments................................................................................. A-I-33
</TABLE>
A-I-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C> <C>
17.6 Headings................................................................................... A-I-33
17.7 Governing Law.............................................................................. A-I-34
17.8 Intentionally Deleted...................................................................... A-I-34
17.9 Notices.................................................................................... A-I-34
17.10 Counterparts............................................................................... A-I-35
17.11 No Third Party Beneficiaries............................................................... A-I-35
17.12 Severability............................................................................... A-I-35
17.13 Entire Agreement........................................................................... A-I-35
</TABLE>
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE
- -----------
<S> <C>
1.2.8 Miscellaneous Excluded Assets
3.1 Distribution of Shares to Partners
6.3 Qualifications
7.4 Station Licenses, Etc.
7.4.3 Restrictions on Operating Status
7.4.4 Exceptions to Short Spacing
7.7 Tangible Personal Property
7.8 Real Property
7.9 (a) Contracts
7.9 (b) Material Contracts
7.11 Environmental Matters
7.12 Intellectual Property
7.13 Financial Statements
7.14 Personnel Information
7.15 Litigation
7.16 Compliance With Laws
7.17 Employee Benefit Plans
9.1.5 Staying Bonuses
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
- -------------
<C> <S>
A Time Brokerage Agreement
B Assignment and Assumption Agreement
C Noncompetition and Confidentiality Agreement
D (Intentionally Deleted)
E (Intentionally Deleted)
F Affiliate Letter
G Form of Estoppel Certificate
H (Intentionally Deleted)
I Registration Agreement
</TABLE>
A-I-5
<PAGE>
ASSETS PURCHASE AGREEMENT
THIS ASSETS PURCHASE AGREEMENT (this "Agreement") is made and entered this
24th day of April, 1997, by and among JACOR BROADCASTING CORPORATION, an Ohio
corporation ("Buyer"), and SECRET COMMUNICATIONS LIMITED PARTNERSHIP, a Delaware
limited partnership ("Seller").
RECITALS
WHEREAS, Seller owns and operates radio stations WLTF (FM) and WTAM (AM)
licensed to Cleveland, Ohio, (together the "Stations" and each individually a
"Station") pursuant to licenses issued by the Federal Communications Commission
("FCC"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain
assets and assume certain obligations associated with the ownership and
operation of the Stations, all on the terms and subject to the conditions set
forth herein; and
WHEREAS, in order to induce Buyer to enter into this Agreement, Seller is
willing to enter into this Agreement and make certain representations and
warranties to, and covenants and agreements with, Buyer.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE OF ASSETS
1.1 TRANSFER OF ASSETS. On the terms and subject to the conditions hereof
and subject to Section 1.2, on the Closing Date (as hereinafter defined), Seller
shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall
purchase and assume from Seller, all of the right, title and interest of Seller
in and to all of the assets, properties, interests and rights of Seller of
whatsoever kind and nature, real and personal, tangible and intangible, owned or
leased (to the extent of Seller's leasehold interest) by Seller as the case may
be, wherever situated, which are used or held for use in the operation of the
Stations (the "Stations Assets"), including but not limited to all of Seller's
right, title and interest in and to the assets, properties, interests and rights
described in this Section 1.1:
1.1.1 all licenses, permits and other authorizations issued to Seller
by any governmental or regulatory authority including without limitation
those issued by the FCC (the licenses, permits and authorizations issued by
the FCC are hereafter referred to as the "Stations Licenses") used or useful
in connection with the operation of the Stations, including but not limited
to those described in SCHEDULE 7.4, along with renewals or modifications of
such items between the date hereof and the Closing Date;
1.1.2 all equipment, electrical devices, antennae, cables, tools,
hardware, office furniture and fixtures, office materials and supplies,
inventory, motor vehicles, spare parts and all other tangible personal
property of every kind and description, and Seller's rights therein, owned,
leased (to the extent of Seller's leasehold interest) or held by Seller and
used or useful in connection with the operations of the Stations, including
but not limited to those items described or listed in SCHEDULE 7.7, together
with any replacements thereof and additions thereto made between the date
hereof and the Closing Date, and less any retirements or dispositions
thereof made between the date hereof and the Closing Date in the ordinary
course of business and consistent with past practices of Seller; provided,
however, Seller agrees that the value of all such assets retired or disposed
of and not replaced with an asset of like kind and quality shall not exceed
$25,000 in the aggregate;
A-I-6
<PAGE>
1.1.3 Subject to the prior assignment and assumption thereof pursuant
to Section of the Time Brokerage Agreement (as defined in Section 4.2
hereof), all contracts, agreements, leases and legally binding contractual
rights of any kind, written or oral, relating to the operation of the
Stations and which are listed in SCHEDULE 7.8 and SCHEDULE 7.9(A), together
with all contracts, agreements, leases and legally binding contractual
rights entered into or acquired by Seller between the date hereof and the
Closing Date in the ordinary course of business, consistent with past
practices of Seller and in accordance with this Agreement and with respect
to which Buyer specifically agrees in a writing executed at Closing to
assume (collectively, the "Contracts") and all Time Sales Agreements (as
defined in the Time Brokerage Agreement). In the event the Commencement Date
under the Time Brokerage Agreement has not occurred prior to the Closing
Date, then the parties shall make the calculations set forth in Section of
the Time Brokerage Agreement as of the Closing Date and Buyer shall be
entitled to a credit against the Purchase Price, for the amount, if any, by
which the aggregate net value of the Stations' Barter Payable (as defined
below) as of the Closing Date exceeds the aggregate net value of the
Station's Barter Receivable (as defined below) by more than Fifty Thousand
Dollars ($50,000) as of the Closing Date. "Barter Payable" means the
aggregate value of time owed pursuant to each of the Trade Agreements.
"Barter Receivable" means the aggregate value of goods and services to be
received pursuant to each of the Trade Agreements.
1.1.4 all of Seller's rights in and to the call letters "WLTF (FM)" and
"WTAM (AM)" as well as all of Seller's rights in and to all trademarks,
trade names, service marks, franchises, copyrights, including registrations
and applications for registration of any of them, computer software,
programs and programming material of whatever form or nature, jingles,
slogans, the Stations' logos and all other logos or licenses to use same and
all other intangible property rights of Seller, which are used or useful in
connection with the operation of the Stations, including but not limited to
those listed in SCHEDULE 7.12 (collectively, the "Intellectual Property")
together with any associated goodwill and any additions thereto between the
date hereof and the Closing Date;
1.1.5 all programming materials and elements of whatever form or nature
owned by Seller, whether recorded on tape or other medium or intended for
live performance, and all copyrights owned by or licensed to Seller that are
used or useful in connection with the operation of the Stations, including
all such programs, materials, elements and copyrights acquired by Seller
between the date hereof and the Closing Date;
1.1.6 all of Seller's rights in and to all the files, documents,
records, and books of account relating to the operation of the Stations or
to the Stations Assets, including, without limitation, the Stations' local
public files, programming information and studies, blueprints, technical
information and engineering data, news and advertising studies or consulting
reports, marketing and demographic data, sales correspondence, lists of
advertisers, promotional materials, credit and sales reports and filings
with the FCC, and all written Contracts to be assigned hereunder, logs,
software programs and books and records relating to employees, financial,
accounting and operation matters; but excluding records relating solely to
any Excluded Asset (as hereinafter defined);
1.1.7 all of Seller's rights under manufacturers' and vendors'
warranties relating to items included in the Stations Assets and all similar
rights against third parties relating to items included in the Stations
Assets;
1.1.8 all real property owned in fee by Sellers together with all
appurtenant easements thereto and all structures, fixtures and improvements
located thereon as more fully described in SCHEDULE 7.8., together with any
additions thereto between the date hereof and the Closing Date;
1.1.9 except for Excluded Assets, such other assets, properties,
interests and rights owned by Seller that are used or useful in connection
with the operation of the Stations or that are located as of the Closing
Date on the real property described on SCHEDULE 7.8.
A-I-7
<PAGE>
The Stations Assets shall be transferred to Buyer free and clear of all
debts, security interests, mortgages, trusts, claims, pledges or other liens,
liabilities, encumbrances or rights of third parties whatsoever, except for
Permitted Encumbrances, if any, as provided for in Section 7.8.3.
Notwithstanding the foregoing, at or prior to the Closing, Buyer may decide, in
the exercise of its sole discretion, not to purchase any one or more of the
Stations Assets (and, in such event, not to assume any liability secured by,
arising from the acquisition of, or otherwise relating to, any such Asset);
provided, that in no event shall such decision reduce the Purchase Price.
1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained
herein, it is expressly understood and agreed that the Stations Assets shall not
include the following assets along with all rights, title and interest therein
(the "Excluded Assets"):
1.2.1 all cash and cash equivalents of Seller on hand and/or in banks,
including without limitation certificates of deposit, commercial paper,
treasury bills, marketable securities, asset or money market accounts and
all such similar accounts or investments;
1.2.2 all accounts receivable or notes receivable for services
performed by Seller in connection with the operation of the Stations prior
to the Closing Date;
1.2.3 subject to the limitation set forth in Section 1.1.2 of this
Agreement, all tangible and intangible personal property of Seller disposed
of or consumed in the ordinary course of business consistent with the past
practices of Seller between the date of this Agreement and the Closing Date;
1.2.4 all Contracts that have terminated or expired prior to the
Closing Date in the ordinary course of business consistent with the past
practices of Seller;
1.2.5 Sellers' documents, record books and such other books and records
as pertain to the organization, existence or capitalization of Seller as a
limited partnership and duplicate copies of such records as are necessary to
enable Seller to file its tax returns and reports as well as any other
records or materials relating to Seller generally and not involving or
relating to the Stations Assets or the operation or operations of the
Stations;
1.2.6 contracts of insurance, and all insurance proceeds or claims made
by Seller relating to property or equipment repaired, replaced or restored
by Seller prior to the Closing Date;
1.2.7 all pension, profit sharing or cash or deferred Section 401(k)
plans and trusts and the assets thereof and any other employee benefit plan
or arrangement and the assets thereof, if any, maintained by Sellers;
1.2.8 any right, property or asset described in Schedule 1.2.8; and
1.2.9 any and all assets and properties of Seller of any kind and
description that are not used or not held for use in the operations of the
Stations.
ARTICLE 2
ASSUMPTION OF OBLIGATIONS
2.1 ASSUMPTION OF OBLIGATIONS. Subject to the provisions of this Section
2.1, Section 2.2 and Section 3.3, on the Closing Date, and subject to any prior
assumption under the Time Brokerage Agreement, Buyer shall assume the
obligations of Seller arising or to be performed on and after the Closing Date
(except to the extent such obligations arise out of or are related to
activities, events or transactions occurring, or conditions existing, on or
prior to the Closing Date) under (a) the Con tracts; and (b) all Time Sales
Agreements. All of the foregoing liabilities and obligations shall be referred
to herein collectively as the "Assumed Liabilities."
2.2 RETAINED LIABILITIES. Notwithstanding anything contained in this
Agreement to the contrary, Buyer expressly does not, and shall not, assume or
agree to pay, satisfy, discharge or perform and will not
A-I-8
<PAGE>
be deemed by virtue of the execution and delivery of this Agreement or any
agreement, instrument or document delivered pursuant to or in connection with
this Agreement or otherwise by reason of or in connection with the consummation
of the transactions contemplated hereby or thereby, to have assumed or to have
agreed to pay, satisfy, discharge or perform, any liabilities, obligations or
commitments of Seller of any nature whatsoever whether accrued, absolute,
contingent or otherwise and whether or not disclosed to Buyer, other than the
Assumed Liabilities. Seller will retain and pay, satisfy, discharge and perform
in accordance with the terms thereof, all liabilities and obligations of the
Seller, other than the Assumed Liabilities, including but not limited to, the
obligation to assume, perform, satisfy or pay any liability, obligation,
agreement, debt, charge, claim, judgment or expense incurred by or asserted
against Seller related to taxes, environmental matters, pension or retirement
plans or trusts, profit-sharing plans, employment contracts, employee benefits,
severance of employees, product liability or warranty, negligence, contract
breach or default, or other obligations, claims or judgments asserted against
Buyer as successor in interest to Seller. All of such liabilities, obligations
and commitments of Seller described in this Section 2.2 shall be referred to
herein collectively as the "Retained Liabilities."
ARTICLE 3
CONSIDERATION
3.1 DELIVERY OF CONSIDERATION. In consideration for the sale of the
Stations Assets to Buyer, in addition to the assumption of certain obligations
of Seller pursuant to Section 2.1 above, Buyer shall, at the Closing (as
hereinafter defined); (i) deliver to Seller, Twenty-Three Million Nine Hundred
and Sixty-Eight Thousand Seven Hundred and Fifty Dollars ($23,968,750) (the
"Cash Consideration") by wire transfer of immediately available funds subject to
adjustment pursuant to the provisions of Section 3.2 below and (ii) deliver to
the Seller or to the partners of Seller as determined by Seller in its sole
discretion no later than the effective date of the Registration Statement (as
defined herein) an aggregate of Seven Hundred and Fifty Thousand shares of
common stock of Jacor Communications, Inc., a Delaware corporation (the "Stock
Consideration"), to be distributed entirely to the Seller or pro rata to the
partners of Seller as set forth on SCHEDULE 3.1 attached hereto, subject to
adjustment pursuant to the provisions of Section 3.4 below (the Cash
Consideration and the Stock Consideration shall be collectively referred to as
the "Purchase Price"). Jacor Communications, Inc. may be referred to herein as
"Jacor".
3.2 PRORATION OF INCOME AND EXPENSES.
3.2.1 Except as otherwise provided herein, and except as previously
prorated pursuant to the Time Brokerage Agreement (as hereinafter defined)
all deposits, reserves and prepaid and deferred income and expenses relating
to the Stations Assets or the Assumed Liabilities and arising from the
conduct of the business and operations of the Stations shall be prorated
between Buyer and Seller in accordance with generally accepted accounting
principles as of 11:59 p.m., Eastern Standard Time, on the date immediately
preceding the Closing Date. Such prorations shall include, without
limitation, all ad valorem, real estate and other property taxes (but
excluding taxes arising by reason of the transfer of the Stations Assets as
contemplated hereby which shall be paid as set forth in Section 13.2),
business and license fees, music and other license fees (including any
retroactive adjustments thereof, which retroactive adjustments shall not be
subject to the ninety-day limitation set forth in Section 3.2.2), utility
expenses, amounts due or to become due under Contracts, rents, lease
payments and similar prepaid and deferred items. Real estate taxes shall be
apportioned on the basis of taxes assessed for the preceding year, with a
reapportionment as soon as the new tax rate and valuation can be
ascertained.
3.2.2 Except as otherwise provided herein, the prorations and
adjustments contemplated by this Section 3.2, to the extent practicable,
shall be made on the Closing Date. As to those prorations and adjustments
not capable of being ascertained on the Closing Date, an adjustment and
proration shall be made within ninety (90) calendar days after the Closing
Date.
A-I-9
<PAGE>
3.2.3 In the event of any disputes between the parties as to such
adjustments, the amounts not in dispute shall nonetheless be paid at the
time provided in Section 3.2.2 and such disputes shall be determined by an
independent certified public accountant mutually acceptable to the parties,
and the fees and expenses of such accountant shall be paid one-half by
Seller and one-half by Buyer. If the aggregate amount in dispute is $10,000
or less, the disputed amount shall be shared equally by Buyer and Seller.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets in a manner reasonably determined by Buyer based upon an
appraisal prepared by an appraiser selected by Buyer, and such appraisal and
allocation shall be completed prior to Closing unless otherwise agreed to by the
parties. Buyer shall pay for such appraisal. Seller and Buyer agree to use the
allocations determined by Buyer for all tax purposes including, without
limitation, those matters subject to Section 1060 of the Internal Revenue Code
of 1986, as amended.
3.4 SUBDIVISION OF STOCK. In the event that subsequent to the date hereof
and prior to the Closing Date, Jacor shall pay a dividend in the common stock of
Jacor, subdivide the common stock of Jacor into a larger number of shares (it
being understood that a sale or issuance of the common stock of Jacor shall not
constitute such a subdivision) or combine the common stock of Jacor into a
smaller number of shares (each of such events may be referred to as a
"Subdivision Event"), there shall be a proportional adjustment in the number of
shares of common stock of Jacor to be distributed to the Seller or to the
partners of Seller, as the case may be.
ARTICLE 4
CLOSING
4.1 CLOSING. Except as otherwise mutually agreed upon by Buyer and Seller,
the consummation of the transactions contemplated herein (the "Closing") shall
occur within five (5) business days after the later to occur of: (a) the
satisfaction or waiver of each condition to closing contained herein (excluding
conditions that by their terms cannot be satisfied until the Closing Date), and
provided that each party hereto shall use its reasonable best efforts to cause
each condition to closing to be satisfied so that the Closing may occur at the
earliest possible date; and (b) the issuance of the Final Order (as defined
below), or such other date as may be mutually agreed by the parties hereto (the
"Closing Date"); provided, however, that Buyer may in its sole discretion, waive
the requirement that a Final Order be issued and elect (subject to clause (a)
above) to close at any time (upon not less than five business days' notice to
Seller) after the release of the initial FCC approval on public notice that it
has consented to the transaction contemplated hereby (the "Initial Approval").
For purposes of the Agreement, "Final Order" (and "Final") means an order or
grant by the FCC which is no longer subject to reconsideration or review by the
FCC or a court of competent jurisdiction and pursuant to which the FCC consents,
as the case may be, to the assignments of the FCC Licenses, contemplated by this
Agreement or to the renewal of the FCC Licenses, each such order or grant being
without the imposition of any conditions adverse to Buyer or any affiliate (as
hereinafter defined) of Buyer with respect to the assignment of the FCC Licenses
to Buyer or the continued operation of the Station or the Station Assets. In the
event that the parties close before the Initial Approval has become a final
order, the parties shall enter into a mutually acceptable Unwind Agreement. The
Closing shall be held in the offices of Graydon, Head & Ritchey, 511 Walnut
Street, Suite 1900, Cincinnati, Ohio 45202, or at such place and in such manner
as the parties hereto may agree.
4.2 TIME BROKERAGE AGREEMENT. Simultaneously with the execution hereof,
Buyer and Sellers are entering into a Time Brokerage Agreement, in the form of
Exhibit A hereto (the "Time Brokerage Agreement"), pursuant to which Sellers
have agreed to make available to Buyer the broadcasting transmission facilities
of the Stations and/or cause to be broadcast on the Stations Buyer's programming
from the Commencement Date (as defined in the Time Brokerage Agreement) during
the term thereof. An Event of Default by either party under the Time Brokerage
Agreement shall constitute a material default under this Agreement and insofar
as the cure period specified in the Time Brokerage Agreement
A-I-10
<PAGE>
has expired with respect to the default, no further cure period shall be
afforded under the provisions of Section 16.1.2 or Section 16.1.3.
ARTICLE 5
GOVERNMENTAL CONSENTS
5.1 FCC CONSENT. It is specifically understood and agreed by Buyer and
Seller that the Closing, the assignment of the Stations Licenses and the
transfer of the Stations Assets are expressly conditioned on and is subject to
the prior consent and approval of the FCC without the imposition of any
conditions materially adverse to Buyer or any affiliate of Buyer (the "FCC
Consent").
5.2 FCC APPLICATION. If the same has not already been filed as of the time
of the execution hereof, then within five (5) business days after the execution
of this Agreement, Buyer and Seller shall file an application with the FCC for
the FCC Consent (the "FCC Application"). Buyer and Seller shall prosecute the
FCC Application with all reasonable diligence and otherwise use their best
efforts to obtain the FCC Consent as expeditiously as practicable (but neither
Buyer nor Seller shall have any obligation to satisfy complainants or the FCC by
taking any steps which would have a material adverse effect upon Buyer or Seller
or upon any of their respective affiliates). If the FCC Consent imposes any
condition on Buyer or Seller or any of their respective affiliates, such party
shall use its best efforts to comply with such condition; provided, however,
that neither Buyer nor Seller shall be required hereunder to comply with any
condition that would have a material adverse effect upon it or any of its
affiliates. If reconsideration or judicial review is sought with respect to the
FCC Consent, the party affected shall vigorously oppose such efforts for
reconsideration or judicial review; provided, however, that nothing herein shall
be construed to limit either party's right to terminate this Agreement pursuant
to Article 16 hereof.
5.3 HSR APPLICATION. Within ten (10) business days after the execution of
this Agreement, Buyer and Seller shall make any and all required governmental
filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") with respect to the transactions contemplated hereby,
and shall use their best efforts to respond as promptly as practicable to all
inquiries received from the applicable governmental agencies or committees for
additional information or documentation. Buyer and Seller will notify each other
of all correspondence, filings or communications between such party or its
representatives, on the one hand, and the applicable governmental agencies or
committees, on the other hand, with respect to this Agreement and the
transaction contemplated hereby. Buyer and Seller will furnish each other with
such necessary information and reasonable assistance as such other parties may
request in connection with their preparation of all filings pursuant to the HSR
Act.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties to Seller
each of which is true and correct on the date hereof, shall survive the Closing
and shall be unaffected by any investigation heretofore or hereafter made by
Seller.
6.1 ORGANIZATION AND STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio. Jacor
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
6.2 AUTHORIZATION AND BINDING OBLIGATION. Buyer has all necessary
corporate power and authority to enter into and perform this Agreement and the
transactions contemplated hereby, and to own or lease the Stations Assets and to
carry on the business of the Stations upon the consummation of the transactions
contemplated by this Agreement. Buyer's execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary action on its part and, assuming the due
authorization, execution and delivery of this Agreement by Seller, this
Agreement
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<PAGE>
will constitute the valid and binding obligation of Buyer, enforceable against
it in accordance with its terms, except as limited by laws affecting creditors'
rights or equitable principles generally.
6.3 QUALIFICATION. Except as set forth in Schedule 6.3, to the best of
Buyer's knowledge, there are no facts which, under the Communications Act of
1934, as amended, or the existing rules and regulations of the FCC, would
disqualify Buyer as an assignee of the Stations Licenses.
6.4 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as set
forth in Article 5 hereof with respect to governmental consents, the execution,
delivery and performance of this Agreement by Buyer: (a) do not conflict with
the provisions of the articles of incorporation or code of regulations of Buyer;
(b) do not require the consent of any third party not affiliated with Buyer,
except for the consent of the Buyer's lenders; (c) will not violate any
applica-ble law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental authority to which Buyer is a party; and (d) will not,
either alone or with the giving of notice or the passage of time, or both,
conflict with, constitute grounds for termination of or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
agreement, instrument, license or permit to which Buyer is now subject.
6.5 LITIGATION. There is no claim, litigation, proceeding or
investi-gation pending or, to the best of Buyer's knowledge, threatened against
Buyer, that could materially adversely affect Buyer's ability to perform its
obligations pursuant to this Agreement. To the best of Buyer's knowledge, Buyer
is not in violation of any law, regulation, or ordinance or any other
requirement of any governmental body or court which could have a material
adverse effect on Buyer's ability to perform its obligations pursuant to this
Agreement.
6.6 COMMISSIONS OR FINDER'S FEES. Neither Buyer nor any person or entity
acting on behalf of Buyer has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any person or entity.
6.7 ISSUANCE OF SHARES. The shares of Jacor common stock to be issued as
the Stock Consideration will be validly issued, fully paid, nonassessable, and
free of preemptive rights, registered under the Securities Act of 1933 and will
be issued in compliance with all state securities laws of Ohio, Illinois,
Michigan and Delaware.
6.8 INFORMATION SUPPLIED FOR REGISTRATION STATEMENT. The information
supplied or to be supplied by Buyer with respect to Jacor, Buyer and their
respective officers, directors and affiliates specifically to be included or
incorporated by reference in the Registration Statement (the "Jacor
Information") on Form S-4 relating to the shares of Jacor common stock to be
issued as the Stock Consideration (the "Registration Statement") will not, at
the time it becomes effective and at the Closing Date, as such Registration
Statement is then amended or supplemented, contain any untrue statement of a
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement will comply as to form with the applicable securities laws.
A-I-12
<PAGE>
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the following representations and warranties to Buyer, each of
which is true and correct on the date hereof, shall survive the Closing and
shall be unaffected by any investigation heretofore or hereafter made by Buyer:
7.1 ORGANIZATION AND STANDING. Seller is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the partnership power and authority to own, lease and operate
the Stations Assets and to carry on the business of the Stations as now being
conducted and as proposed to be conducted between the date hereof and the
Closing Date. The general partners of Seller, Broadcast Alchemy, L.P., a
Delaware limited partnership and Booth Broadcasting, Inc., a Michigan
corporation are duly organized, validly existing and in good standing under the
laws of the States of Delaware and Michigan, respectively and have authorized
Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, and Booth American Company, a Michigan corporation, is duly
organized, validly existing and in good standing under the laws of the State of
Michigan.
7.2 AUTHORIZATION AND BINDING OBLIGATION. Seller has the power and
authority, and has taken all necessary and proper action, corporate and
otherwise, to enter into and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Seller and, assuming the due authorization, execution
and delivery of this Agreement by Buyer, constitutes the valid and binding
obligation of Seller enforceable against Seller in accordance with its terms,
except as limited by laws affecting the enforce ment of creditor's rights or
equitable principles generally.
7.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS. Except as set
forth in Article 5 with respect to governmental consents and in SCHEDULE 7.8 or
SCHEDULE 7.9(A) with respect to consents required in connection with the
assignment of certain Contracts, the execution, delivery and performance of this
Agreement by Seller: (a) do not require the consent of any third party
(including, without limitation, the consent of any governmental, regulatory,
administrative or similar authority); (b) will not conflict with, result in a
breach of, or constitute a violation of or default under, the provisions of
Seller's partnership agreement (or other charter or organizational documents) or
any applicable law, judgment, order, injunction, decree, rule, regulation or
ruling of any governmental authority to which Seller is a party or by which
Seller, or any of the Stations Assets are bound; (c) will not either alone or
with the giving of notice or the passage of time, or both, conflict with,
constitute grounds for termination of or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any Contract,
agreement, instrument, license or permit to which Seller or any of the Stations
Assets is now subject; and (d) will not result in the creation of any lien,
charge or encumbrance on any of the Stations Assets.
7.4 GOVERNMENT AUTHORIZATIONS.
7.4.1 SCHEDULE 7.4 hereto contains a true and complete list of the
Stations Licenses and other licenses, permits or other authorizations from
governmental and regulatory authorities which are required for the lawful
conduct of the business and operations of the Stations in the manner and to
the full extent they are presently conducted (including, without limitation,
auxiliary licenses associated with each Station). Seller has delivered to
Buyer true and complete copies of the Station Licenses and the other
licenses, permits and authorizations listed in SCHEDULE 7.4, including any
and all amendments and other modifications thereto.
7.4.2 Seller is the authorized legal holder of the Stations Licenses
and the other licenses, permits and authorizations listed in SCHEDULE 7.4,
which are in full force and effect, in good standing and are unimpaired by
any act of Seller or Seller's partners, employees or agents, and none of
which is
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subject to any restrictions or conditions which would limit in any material
respect the full operation of the Stations as now operated.
7.4.3 Except as set forth in SCHEDULE 7.4, there are no applications,
complaints, petitions or proceedings pending or, to the best of Seller's
knowledge, threatened as of the date hereof before the FCC or any other
governmental or regulatory authority relating to the business or operations
of the Stations. The operations of the Stations are in accordance with the
Stations Licenses and the underlying construction permits and the other
licenses, permits and authorizations listed in SCHEDULE 7.4. No proceedings
are pending or, to the best of Seller's knowledge, threatened, and there has
not been any act or omission of Seller or Seller's partners, or employees,
which may result in the revocation, modification, non-renewal or suspension
of any of the Stations Licenses or the other licenses, permits and
authorizations listed in SCHEDULE 7.4, the denial of any pending
applications, the issuance of any cease and desist order, the imposition of
any administrative actions by the FCC or any other governmental or
regulatory authority with respect to the Stations Licenses or the other
licenses, permits and authorizations listed in SCHEDULE 7.4 or which may
affect Buyer's ability to continue to operate the Stations as they are
currently operated.
7.4.4 Except as set forth on SCHEDULE 7.4.4, the Stations are licensed
by the FCC to operate and each is operating with the maximum facilities
specified in their respective Station Licenses. Except as set forth in
SCHEDULE 7.4.4, the Stations are not short-spaced, on a grand-fathered basis
or otherwise, to any existing station, outstanding domestic construction
permit or pending application therefor, or to any existing or proposed
domestic broadcast radio allotment.
7.4.5 To the best of Seller's knowledge, none of the Stations is
causing objectionable interference to the transmissions of any other
broadcast station or communications facility and none of the Stations has
received any complaints with respect thereto. To the best of Seller's
knowledge, no other broadcast station or communications facility is causing
objectionable interference to respective transmissions of the Stations or
the public's reception of such transmissions.
7.4.6 Each of the Stations Licenses has an expiration date of October
1, 2003. Seller has no reason to believe that the Stations Licenses and the
other licenses, permits, or authorizations listed in SCHEDULE 7.4 will not
be renewed in their ordinary course.
7.4.7 All reports, forms, and statements required to be filed by Seller
with the FCC with respect to the Stations have been filed and are
substantially complete and accurate.
7.4.8 To the best knowledge of Seller there are no facts which, under
the Communi cations Act of 1934, as amended, or the existing rules and
regulations of the FCC, would disqualify Seller as assignor of the Stations
Licenses.
7.4.9 The operation of the Stations and all of the Stations Assets are
in compliance in all respects with ANSI Radiation Standards C95.1--1992.
7.5 COMPLIANCE WITH FCC REGULATIONS. The operation of the Stations and all
of the Stations Assets are in compliance in all material respects with: (a) all
applicable engineering standards required to be met under applicable FCC rules;
and (b) all other applicable federal, state and local rules, regulations,
requirements and policies, including, but not limited to, equal employ ment
opportunity policies of the FCC, and all applicable painting and lighting
requirements of the FCC and the Federal Aviation Administration to the extent
required to be met under applicable FCC rules and regulations, and to the best
of Seller's knowledge, there are no existing claims to the contrary.
7.6 TAXES. Seller has filed all federal, state, local and foreign income,
franchise, sales, use, property, excise, payroll and other tax returns required
by law to be filed by it and has paid in full all taxes, estimated taxes,
interest, assessments, and penalties due and payable by it. All returns and
forms which have been filed have been true and correct in all material respects
and no tax or other payment in an amount other
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than as shown on such returns and forms is required to be paid by Seller and has
not been paid by Seller. There are no present disputes as to taxes of any nature
payable by Seller which in any event could adversely affect any of the Stations
Assets or the operation of the Stations by Buyer, and Seller has not been
advised that any of its returns, federal, state, local or foreign, have been or
are being audited. Seller does not and will not in the future have any
liability, fixed or contingent, for any unpaid federal, state or local taxes or
other governmental or regulatory charges whatsoever (including without
limitation withholding and payroll taxes) which could result in a lien on the
Stations Assets after conveyance thereof to Buyer or in any other form of
transferee liability to Buyer.
7.7 PERSONAL PROPERTY. SCHEDULE 7.7 hereto contains a list of all material
items of tangible personal property owned by Seller and used in the conduct of
the business and operations of the Stations. Except as disclosed in SCHEDULE
7.7, Seller has, and following the Closing, Buyer will have, good and marketable
title to all of the Stations Assets (other than those subject to lease) and none
of the Stations Assets is, or at the Closing will be, subject to any security
interest, mortgage, pledge, lease, license, lien, encumbrance, title defect or
other charge, except for liens for taxes not yet due and payable. The properties
listed in SCHEDULE 7.7, along with those properties subject to lease and
included among the Contracts, constitute all material tangible personal property
necessary to operate the Stations as the same are now being operated. To the
best of Seller's knowledge, all items of material tangible personal property
necessary to operate the Stations are in good and techni cally sound operating
condition and repair, are free from all material defect and damage, and are
suitable for the purposes for which they are now being used.
7.8 REAL PROPERTY.
7.8.1 SCHEDULE 7.8 hereto contains a complete and accurate list and
description of all real property (including without limitation, real
property relating to the towers, transmitters, studio sites and offices of
the Stations) used by Seller in connection with the operation of the
Stations (the "Real Estate"). Seller owns no real property relating to the
towers, transmitters, studio sites and offices of the Stations.
7.8.2 The Real Estate Contracts listed on SCHEDULE 7.8 are in full
force and effect and are valid, binding and enforceable in accordance with
their terms. Seller enjoys quiet possession of all real property subject to
the Real Estate Contracts. Seller is not in default under any Real Estate
Contract nor is any other party thereto, and there are no present disputes
or claims with respect to offsets or defenses by any party against the other
under any of the Real Estate Contracts. Seller has delivered to Buyer true
and complete copies of all Real Estate Contracts. Except as expressly set
forth in SCHEDULE 7.8 hereto, the assignment of the Real Estate Contracts to
Buyer will not permit the other party to accelerate the rent, cause the
terms thereof to be renegotiated or constitute a default thereunder, and
will not require the consent of any such party to the assignment thereof to
Buyer.
7.8.3 Seller has, and following the Closing, Buyer will have, good,
marketable and insurable leasehold title to the Real Estate free and clear
of any mortgages, liens, charges and encumbrances, except for Assumed
Liabilities, liens for taxes not yet due and payable and easements,
restrictions, liens, encumbrances, exceptions and exclusions described in
SCHEDULE 7.8, if any ("Permitted Encumbrances"). Seller has delivered to
Purchaser copies of all title insurance policies and surveys relating to the
Real Estate, to the extent that such items exist.
7.8.4 Seller has full legal and practical access to all of the real
property described in SCHEDULE 7.8. The Real Estate includes all the real
property, easements, rights of way, and other real property interests
necessary to conduct the business and operations of the Stations as they are
now conducted. To the best of Seller's knowledge, none of the buildings,
structures, improvements or fixtures constructed on any real property leased
by Seller in connection with the operation of the Station, including, but
not limited to, all towers, guy wires and guy anchors and ground radials,
encroach upon adjoining real property, and all such buildings, structures,
improvements and fixtures are constructed and are operated and used in
conformance with all "set back" lines, easements, cove
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nants, restrictions and all applicable building, fire, zoning, health and
safety laws and codes. To the best of Seller's knowledge, no utility lines
serving such real property pass over the lands of a third party except where
appropriate easements have been obtained. To the best of Seller's knowledge,
all buildings, structures, towers, antennae, improvements and fixtures
comprising part of the real properties leased by Seller are in good and
technically sound operating condition, have no latent structural mechanical
or other defects of material significance, and are reasonably suitable for
the purposes for which they are being used. There is no pending or, to the
best knowledge of Seller, threatened condemnation or other legal proceeding
or action of any kind relating to such real property and/or title thereto.
7.9 CONTRACTS. SCHEDULE 7.9(A) lists all Contracts to which Seller is a
party, or which are binding on Seller, as of the date of this Agreement. Those
Contracts, if any, requiring the consent of a third party to assignment are
identified in SCHEDULE 7.9(A). Notwithstanding anything to the contrary herein,
Seller shall provide Buyer with copies or summaries of all arrangements with
ASCAP, BMI radio representatives, vendors of goods and services to enable Buyer
to determine whether Seller enjoys a discount or other benefit under such
arrangements. Those Contracts, if any, that Seller and Buyer have agreed are
material to the operation of the Station Assets and the valid assignment of
which and receipt by Buyer of consents thereto (along with appropriate estoppel
certificates for the leases related to the Real Estate) is a condition to the
consummation of the transactions contemplated hereby (the "Material Contracts")
are listed on SCHEDULE 7.9(B).
7.10 STATUS OF CONTRACTS, ETC. Seller has delivered to Buyer true and
complete copies of all written Contracts and true and complete memoranda of all
oral Contracts, including any and all amendments and other modifications
thereto. All of the Contracts are in full force and effect and are valid,
binding and enforceable in accordance with their respective terms, except as
limited by laws affecting creditors' rights or equitable principles generally.
Seller has complied in all respects with all Contracts and is not in default
beyond any applicable grace periods under any thereof and to the best of
Seller's knowledge, no other contracting party is in default under any thereof.
7.11 ENVIRONMENTAL. Except as set forth in SCHEDULE 7.11, to the best of
Seller's knowledge, Seller has complied in all material respects with all
federal, state and local environmental laws, rules and regulations as in effect
on the date hereof applicable to each of the Stations and its operations
including but not limited to the FCC's guidelines regarding RF radiation.
Notwithstanding anything to the contrary herein, Seller is making
representations and warranties with respect to FCC guidelines regarding RF
radiation without the foregoing and/or following knowledge and/or materiality
qualification. The technical equipment included in the Stations Assets does not
contain any PCBs. To the best of Seller's knowledge, no hazardous or toxic
waste, substance, material or pollutant (as those or similar terms are defined
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. SectionSection 9601 ET SEQ., Toxic Substances
Control Act, 15 U.S.C. SectionSection 2601 ET SEQ., the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. SectionSection 6901 ET SEQ. or any other
applicable federal, state and local environmental law, statute, ordinance,
order, judgment, rule or regulation relating to the environment or the
protection of human health ("Environmental Laws")), including but not limited
to, any asbestos or asbestos related products, oils or petroleum-derived
compounds, CFCs, PCBs, or underground storage tanks, have been released, emitted
or discharged or are currently located in, on, under, or about the real property
on which the Stations Assets are situated including the transmitter sites or
contained in the tangible personal property included in the Stations Assets. To
the best of Seller's knowledge, the Stations Assets and Seller's use thereof are
not in violation of any Environmental Laws or any occupational, safety and
health or other applicable law now in effect. Seller shall be, as of the Closing
Date and thereafter, solely responsible for all environmental liabilities, of
whatsoever kind and nature, arising out of or attributable to the operation or
ownership of the Station Assets prior to the Closing Date.
7.12 INTELLECTUAL PROPERTY. SCHEDULE 7.12 hereto is a true and complete
list of all Intellectual Property applied for, registered or issued to, and
owned by Seller or under which Seller is a licensee and
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which is used in the conduct of the Seller's business and operations of the
Stations, and except as set forth on SCHEDULE 7.12: (a) Seller's right, title
and interest in the Intellectual Property as owner or licensee, as applicable,
is free and clear of all liens, claims, encumbrances, rights, or equities
whatsoever of any third party and, to the extent any of the Intellectual
Property is licensed to Seller, such interest is valid and uncontested by the
licensor thereof or any third party; (b) all computer software located at any of
Seller's premises or used in Seller's business or operations is properly
licensed to Seller, and all of Seller's uses of such computer software are
authorized under such licenses; (c) all of Seller's right, title and interest in
and to the Intellectual Property and computer software shall be assignable to
Buyer at Closing, and upon such assignment, Buyer shall receive complete and
exclusive right, title, and interest in and to all tangible and intangible
property rights existing in the Intellectual Property; and (d) to the best of
Seller's knowledge, there are no infringements or unlawful use of such
Intellectual Property by Seller or any third party in connection with Seller's
business or operations.
7.13 FINANCIAL STATEMENTS. Set forth in SCHEDULE 7.13 are complete copies
of the unaudited balance sheets and income statements of the Stations as of and
for the periods from August 1, 1994 through December 31, 1994; from January 1,
1995 through December 31, 1995; and from January 1, 1996 through December 31,
1996 (collectively, the "Financial Statements"). The Financial Statements (and
the Interim Financial Statements (as hereinafter defined in Section 9.1.8)
provided pursuant to the terms hereof) fairly present the financial condition of
the Stations and have been (and in the case of the Interim Financial Statements,
will be) prepared in accordance with the books and records of the Stations in
accordance with generally accepted accounting principles consistently applied
and maintained throughout the periods indicated except as has been disclosed in
SCHEDULE 7.13. The Financial Statements present (and the Interim Financial
Statements will present) fairly the financial condition and results of
operations of the Stations for the periods indicated. The financial information
within the Financial Statements does not include (and the financial information
to be within the Interim Financial Statements will not include) financial
information unrelated to the operations of the Stations. December 31, 1996, is
hereinafter referred to as the "Financial Statement Date."
7.14 PERSONNEL INFORMATION.
7.14.1 SCHEDULE 7.14 contains a true and complete list of all persons
employed at the Station, including date of hire, a description of material
compensation arrangements (other than employee benefit plans set forth in
SCHEDULE 7.17) and a list of other terms of any and all agreements affecting
such persons and their employment by Seller. Seller has received no notice
that, and Seller is not aware of, any employee who shall or is likely to
terminate his or her employment relationship with the Stations upon the
execution of this Agreement or after the Closing.
7.14.2 Seller is not a party to any contract or agreement with any
labor organization, nor has Seller agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any employees of Seller. Seller has no
knowledge of any organizational effort currently being made or threatened by
or on behalf of any labor union with respect to employees of Seller.
7.14.3 Except as disclosed in SCHEDULE 7.14, Seller has complied in all
material respects with all laws relating to the employment of labor,
including, without limitation, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and those laws relating to wages, hours,
collective bargaining, unemployment insurance, workers' compensation, equal
employment opportunity and payment and withholding of taxes.
7.15 LITIGATION. Except as set forth in SCHEDULE 7.15, Seller is not
subject to any judgment, award, order, writ, injunction, arbitration decision or
decree relating to the conduct of the business or the operation of the Stations
or any of the Stations Assets, and there is no litigation, administrative
action, arbitration, proceeding or investigation pending or, to the best
knowledge of Seller, threatened against Seller or the Stations in any federal,
state or local court, or before any administrative agency or arbitrator
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(includ-ing, without limitation, any proceeding which seeks the forfeiture of,
or opposes the renewal of, any of the Stations Licenses), or before any other
tribunal duly authorized to resolve disputes. In particular, but without
limiting the generality of the foregoing, there are no applications, complaints
or proceedings pending or, to the best knowledge of Seller, threatened before
the FCC or any other governmental organization with respect to the business or
operations of the Stations.
7.16 COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 7.16, Seller is
not in violation in any material respect of, and has not received any notice
asserting any non-compliance by it in connection with the operation of the
Stations or use or ownership of any of the Stations Assets with, any applicable
statute, rule or regulation, whether federal, state or local. Seller is not in
default with respect to any judgment, order, injunction or decree of any court,
administrative agency or other governmental authority or any other tribunal duly
authorized to resolve disputes which relate to the transactions contemplated
hereby. Seller is in compliance, in all material respects, with all laws,
regulations and governmental orders applicable to the conduct of the business
and operations of the Stations, and its present use of the Stations Assets does
not violate any of such laws, regulations or orders.
7.17 EMPLOYEE BENEFIT PLANS. SCHEDULE 7.17 contains a true and complete
list of the date of this Agreement of all employee benefit plans applicable to
the employees of Sellers employed at the Stations, and a brief description
thereof. Seller does not maintain any other employee benefit plan as the term is
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended, applicable to the employees of Seller employed at the Stations.
7.18 COMMISSIONS OR FINDER'S FEES. Except for the payment due to Star
Media, Inc., for which Seller is solely responsible, neither Seller, nor any
person or entity acting on behalf of Seller has agreed to pay a commission,
finder's fee or similar payment in connection with this Agreement or any matter
related hereto to any person or entity. The breach of the foregoing
representation and warranty shall not be subject to the indemnification
limitations as provided under Section 15.2 below.
7.19 CONDUCT OF BUSINESS IN ORDINARY COURSE: ADVERSE CHANGE. Since the
Financial Statement Date: (a) Seller has conducted the business of the Stations
only in the ordinary course consistent with past practices; (b) there has not
been any material adverse change in the business, assets, properties, prospects
or condition (financial or otherwise) of Seller or the Stations, or any damage,
destruction, or loss affecting any of the Stations Assets; and (c) Seller has
not created, assumed, or suffered any mortgage, pledge, lien or encumbrance on
any of the Stations Assets.
7.20 INTENTIONALLY DELETED.
7.21 UNDISCLOSED LIABILITIES. No liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, relating to Seller, the
Stations or the Stations Assets exists which could, after the Closing result in
any form of transferee liability against Buyer or subject the Stations Assets to
any lien, encumbrance, claim, charge, security interest or imposition whatsoever
or otherwise affect the full, free and unencumbered use of the Stations Assets
by Buyer.
7.22 FULL DISCLOSURE. No representation or warranty made by Seller
contained in this Agreement or any certificate, document or other instrument
furnished or to be furnished by Seller pursuant hereto contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact required to make any statement contained herein or therein not
misleading. Seller is not aware of any impending or contemplated event or
occurrence that would cause any of the foregoing representations not to be true
and complete on the date of such event or occurrence as if made on that date.
7.23 INSURANCE. Seller now has in force adequate fire and other risk
insurance covering the full replacement value of the Stations Assets and shall
cause such insurance to be maintained in full force until the Closing Date.
Seller also shall maintain in full force until the Closing Date, adequate
general public liability insurance in amounts consistent with broadcasting
industry standards for similar stations. During the period of Seller's ownership
of the Stations, none of the towers or Real Estate relating to the use of or
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operation of the Stations have been materially and adversely affected in any way
as a result of fire, explosion, earthquake, accident, rain, storm, drought,
riot, Act of God or public enemy or any other casualty, whether or not covered
by insurance.
7.24 INFORMATION SUPPLIED FOR REGISTRATION STATEMENT. The information
supplied or to be supplied by Seller and Seller's partners in the Registration
Statement (other than the Jacor Information), will not, at the time it becomes
effective and at the Closing Date, as such Registration Statement is then
amended or supplemented, contain any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
********
Whenever in this Article 7 a warranty or representation is qualified by a
word or phrase referring to Seller's knowledge, it shall mean to the best of
Frank E. Wood's, John Crabb's, Rob Ridder's or any of the Station's general
manager's actual knowledge after having made due inquiry of the officers,
directors, employees, representatives and agents of Seller who would be expected
to have knowledge of the matter, and with respect to the condition of any
Stations Assets, records or other object, after having inspected it.
ARTICLE 8
COVENANTS OF BUYER
8.1 CLOSING. Subject to Article 11 hereof, on the Closing Date, Buyer
shall purchase the Stations Assets from Seller as provided in Article 1 hereof
and shall assume the Assumed Liabilities of Seller as provided in Article 2
hereof.
8.2 NOTIFICATION. Buyer will provide Seller prompt written notice of any
change in any of the information contained in the representations and warranties
made in Article 6. Buyer shall also notify Seller of any litigation, arbitration
or administrative proceeding pending or, to its knowledge, threatened against
Buyer which challenges the transactions contemplated hereby.
8.3 NO INCONSISTENT ACTION. Buyer shall not take any action which is
materially inconsistent with its obligations under this Agreement or take any
action which would cause any representation or warranty of Buyer contained
herein to be or become false or invalid or which could hinder or delay the
consummation of the transactions contemplated by this Agreement.
8.4 ACCOUNTS RECEIVABLE. Subject to the terms of the Time Brokerage
Agreement, Buyer acknowledges that all accounts receivable arising prior to the
Closing Date in connection with the operation of the Station, including but not
limited to accounts receivable for advertising revenues for programs and
announcements performed prior to the Closing Date and other broadcast revenues
for services performed prior to the Closing Date, shall remain the property of
Seller (the "Seller Accounts Receivable") and that Buyer shall not acquire any
beneficial right or interest therein or responsibility therefor. For a period of
one hundred twenty (120) days from the Closing Date ("Collection Period"), Buyer
agrees to use reasonable efforts to assist Seller in collection of the Seller
Accounts Receivable in the normal and ordinary course of Buyer's business and
will apply all such amounts collected to the debtor's oldest account receivable
first, except that any such accounts collected by Buyer from persons who are
also indebted to Buyer may be applied to Buyer's account if so directed by the
debtor if there is a bona fide dispute between Seller and such account debtor
with respect to such account and in which case the Buyer shall notify the Seller
of such dispute and after such notification Seller shall have the right to
pursue collection of such account and to avail itself of all legal remedies
available to it. Buyer's obligation and authority shall not extend to the
institution of litigation, employment of counsel or a collection agency or any
other extraordinary means of collection. Buyer agrees to reasonably cooperate
with Seller, at Seller's expense, as to any litigation or other collection
efforts instituted by Seller to collect any delinquent Seller Accounts
Receivable. During the Collection Period, neither Seller, any partner, nor their
agents shall make any
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direct solicitation of any account debtor for collection purposes or institute
litigation for the collection of amounts due. Any amounts relating to the Seller
Accounts Receivable that are paid directly to the Seller shall be retained by
the Seller, but Seller shall provide Buyer with prompt notice of any such
payment. Every thirty (30) days during the Collection Period, Buyer shall make a
payment to Seller equal to the amount of all collec-tions of Seller Accounts
Receivable during such thirty (30) day period less any commissions and/or other
expenses due thereon (which Buyer is hereby directed to pay on Seller's behalf).
At the end of the 120-day collection period, any remaining Seller Accounts
Receivable shall be returned to Seller for collection.
8.5 ADEQUATE CURRENT PUBLIC INFORMATION. Buyer and Jacor will use
reasonable efforts to make and keep available the "adequate current public
information" required by Rule 144(c) under the Securities Act of 1933 for the
period one year after the Closing.
ARTICLE 9
COVENANTS OF SELLER
9.1 SELLER'S PRE-CLOSING COVENANTS. Seller covenants and agrees with
respect to the Stations that, between the date hereof and the Closing Date,
except as expressly permitted by this Agreement or with the prior written
consent of Buyer, Seller shall act in accordance with the following:
9.1.1 Subject to Buyer's time brokering of the Stations pursuant to the
Time Brokerage Agreement, Seller shall conduct the business and operations
of the Stations in the ordinary and prudent course of business consistent
with past practice and with the intent of preserving the ongoing operations
and assets of the Stations, including but not limited to maintaining the
independent identity of the Stations, retaining the current format and
programming (including the content thereof) of the Stations and using its
reasonable best efforts to retain the services of all active employees,
consultants and agents.
9.1.2 Subject to Buyer's time brokering of the Stations pursuant to the
Time Brokerage Agreement, Seller shall preserve the operation of the
Stations intact and preserve the business of the Stations' advertisers,
customers, suppliers and others having business relations with the Stations
and continue to conduct financial operations of the Stations, including its
credit and collection and pricing policies and practices, in the ordinary
course of business consistent with past practices.
9.1.3 Subject to Buyer's time brokering of the Stations pursuant to the
Time Brokerage Agreement, Seller shall operate the Stations in all respects
in accordance with FCC rules and regulations and the Stations Licenses and
with all other laws, regulations, rules and orders, and shall not cause or
permit by any act, or failure to act, any of the Stations Licenses or other
licenses, permits or authorizations listed in SCHEDULE 7.4 to expire, be
surrendered, adversely modified, or otherwise terminated, or fail to
prosecute with due diligence any pending applications to the FCC.
9.1.4 Should any fact relating to Seller which would cause the FCC to
deny its consent to the transactions contemplated by this Agreement come to
Seller's attention, Seller will promptly notify Buyer thereof and will use
its best efforts to take such steps as may be necessary to remove any such
impediment to the FCC's consent to the transactions contemplated by this
Agreement.
9.1.5 Subject to Buyer's time brokering of the Stations pursuant to the
Time Brokerage Agreement (which provisions shall control over any
inconsistent provision in this Section 9.1.5), Seller shall not: (a) sell,
lease or dispose of or commit to sell, lease or dispose of any of the
Stations Assets, except as permitted pursuant to Section 1.1.2 hereof; (b)
sell broadcast time on a prepaid basis (other than in the course of existing
credit practices); (c) except as required by applicable law, grant or agree
to grant any general increases in the rates of salaries or compensation
payable to employees of the Stations; (d) grant or agree to grant any
specific bonus or increase in compensation to any executive or management
employee of the Stations other than in accordance with past practice or in
compliance
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with the Stations' budgets for 1997 or as set forth in Schedule 9.1.5 for
which Seller shall be solely responsible; (e) provide for any new pension,
retirement or other employment benefits for employees of the Stations or any
increases in any existing benefits; (f) modify, change or terminate any
Contract; (g) create, assume or permit to exist any mortgage, pledge, lien,
or other charge or encumbrance or rights affecting any of the Stations
Assets, except for those in existence on the date of this Agreement and
disclosed in SCHEDULE 7.8 or SCHEDULE 7.9(A); (h) change the call letters of
the Stations; or (i) take any action which would cause any representation or
warranty contained herein to be or become false or invalid or which could
hinder or delay the consummation of the transactions contemplated by this
Agreement.
9.1.6 Seller will provide Buyer prompt written notice of any change in
any of the information contained in the representations and warranties made
in Article 7 or any Schedule.
9.1.7 In order that Buyer may have full opportunity to make such
investigation as it desires of the affairs of the Stations, including the
right to audit the Financial Statements and Interim Financial Statements of
Seller, Seller shall give or cause the Stations to give Buyer and Buyer's
counsel, accountants, engineers and other representatives, at Buyer's
reasonable request and upon reasonable notice, full and reasonable access
during normal business hours to all of Seller's personnel, properties,
books, Contracts, reports and records (including, without limitation,
financial information and tax returns relating to the Stations, and
environmental audits in existence with respect to the Station Assets), real
estate, buildings and equipment relating to the Stations and to the
Stations' employees, and to furnish Buyer with information and copies of all
documents and agreements relating to the Stations and the operation thereof
(including but not limited to financial and operating data and other
information concerning the financial condition, results of operations and
business of the Stations) that Buyer may reasonably request. The rights of
Buyer under this Section 9.1 shall not be exercised in such a manner as to
interfere unreasonably with the business of the Stations.
9.1.8 Within thirty (30) days of the end of each calendar quarter,
Seller shall deliver to Buyer an unaudited statement of revenue and expenses
of the Stations and a balance sheet for the month then ended (collectively,
the "Interim Financial Statements"). Seller shall also furnish to Buyer any
and all information customarily prepared by the Stations concerning the
financial condition and results of operations of the Stations.
9.1.9 Seller shall cooperate, and use its reasonable best efforts to
cause its independent accountants to reasonably cooperate, with Buyer, at
Buyer's expense, in order to enable Buyer to have Seller's or Buyer's
independent accountants prepare audited financial statements for the
Stations for the most recently completed fiscal year-end. Without limiting
the generality of the foregoing, Seller agrees that it will: (i) consent to
the use of such audited financial statements in any registration statement
or other document filed by Buyer or any of its affiliates under the
Securities Act or the Exchange Act, and (ii) execute and deliver, and cause
its officers to execute and deliver, such "representation" letters as are
customarily delivered in connection with audits and as Seller's or Buyer's
independent accountants may reasonably request under the circumstances.
9.1.10 Seller shall use its reasonable best efforts to obtain (i) any
third party consents necessary for the assignment of any Contract (which
shall not require any payment to any such third party except for such
amounts contemplated by the Contract to be assigned, any amount then owing
by Seller to such third party or the reasonable expenses incurred by such
third party in connection with such assignment), and (ii) estoppel
certificates from any and all lessors who are party to the Real Estate
Contracts listed on SCHEDULE 7.8.
9.1.11 Seller shall use its best efforts to transfer to Buyer any
discounts or other benefits which it enjoys under any arrangement as
described in Section 7.9 of this Agreement.
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9.2 NOTIFICATION. Seller agrees to notify Buyer of any litigation,
arbitration or administrative proceeding pending or, to the best of its
knowledge, threatened, which challenges the transactions contemplated hereby.
Seller shall promptly notify Buyer if any of the normal broadcast transmissions
of any Station are interrupted, interfered with or in any way impaired, and
shall provide Buyer with prompt written notice of the problem and the measures
being taken to correct such problem. If either of such Stations is not restored
so that operation is resumed to full licensed power and antenna height within
five (5) days of such event, or if more than one (1) such material event occurs
within any thirty (30) day period, or if any of the Stations shall be off the
air for more than seventy-two (72) consecutive hours, then Buyer shall have the
right to terminate this Agreement.
9.3 NO INCONSISTENT ACTION. Seller shall not take any action which is
materially inconsistent with its obligations under this Agreement, or take any
action which would cause any representa tion or warranty of Seller contained
herein to be or become false or invalid or which could hinder or delay the
consummation of the transactions contemplated by this Agreement.
9.4 CLOSING. Subject to Article 12 hereof, on the Closing Date, Seller
shall transfer, convey, assign and deliver to Buyer the Stations Assets and the
Assumed Liabilities as provided in Articles 1 and 2 of this Agreement.
9.5 OTHER ITEMS. Except as otherwise specifically contemplated by this
Agreement or the Time Brokerage Agreement, until the Closing Date, Seller shall
not (a) waive or release any right relating to the business or operations of the
Stations, except for adjustments or settlements made in the ordinary course of
business consistent with past practices; (b) transfer or grant any material
rights under any of the Stations Licenses; (c) enter into any commitment for
capital expenditures for which Buyer would become liable after the Closing Date;
(d) subject to Buyer's time brokering of the Stations pursuant to the Time
Brokerage Agreement, introduce any material changes in the broadcast hours or in
the format of the Stations or any other material change in the Stations'
programming policies; (e) enter into any transaction or make or enter into any
contract or commitment with respect to any of the Stations or the Stations
Assets which by reason of its size or otherwise is not in the ordinary course of
business consistent with past practices; and (f) change the call letters of any
Station.
9.6 EXCLUSIVITY. Seller agrees that, commencing on the date hereof through
the Closing or earlier termination of this Agreement, Buyer shall have the
exclusive right to consummate the transactions contemplated herein, and during
such exclusive period, Seller agrees that Seller, nor any partner or employee or
other representative or agent of Seller: (a) will initiate, solicit or
encourage, directly or indirectly, any inquiries, or the making or
implementation of any proposal or offer with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of, all or any
portion of the Stations Assets or any securities of Seller (any such inquiry,
proposal or offer being hereinafter referred to as an "Acquisition Proposal" and
any such transaction being hereinafter referred to as an "Acquisition"); (b)
will engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; or (c) will continue any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal or Acquisition and will take the necessary steps to
inform the individuals or entities referred to above of the obligations
undertaken by them in this Section 9.6.
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9.7 INTENTIONALLY DELETED.
9.8 SELLER'S RULE 145 AFFILIATES. Seller shall deliver to Buyer and Jacor
a letter ("Affiliate Letter") identifying all persons who are, at the time the
transactions contemplated by this Agreement are submitted to the partners of
Seller for approval, "affiliates" of Seller for purposes of Rule 145 under the
Securities Act ("Seller's Rule 145 Affiliates"). Seller shall cause each Person
who is identified as a Seller's Rule 145 Affiliate in such letter to deliver to
Buyer and Jacor on or prior to the Closing Date a written agreement
substantially in the form attached hereto as Exhibit F. Jacor shall be entitled
to place legends on any certificates of Jacor Common Stock issued to such
Seller's Rule 145 Affiliates to restrict transfer of such shares as set forth
above, provided, however, such legends shall be removed at the request of a
Seller's Rule 145 Affiliate not earlier than one year after the Closing Date.
9.9 CONSTRUCTION PERMIT. BP-960711AA. Seller shall use its best efforts to
complete construction under Construction Permit BP-960711AA and to file and
prosecute FCC Form 302 License to Cover. Seller has no knowledge of any
impediment to the prompt construction under and operation pursuant to such
Construction Permit and Seller is aware of no reason why such License to Cover
such Construction Permit would not be promptly granted.
ARTICLE 10
JOINT COVENANTS
Buyer and Seller hereby covenant and agree that between the date hereof and
the Closing Date, each shall act in accordance with the following:
10.1 CONFIDENTIALITY. Subject to the requirements of applicable law, Buyer
and Seller shall each keep confidential all information obtained by it with
respect to the other parties hereto in connection with this Agreement and the
negotiations preceding this Agreement, and will use such information solely in
connection with the transactions contemplated by this Agreement, and if the
transactions contemplated hereby are not consummated for any reason, each shall
return to each other party hereto, without retaining a copy thereof, any
schedules, documents or other written information obtained from such other party
in connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, no party shall be required to keep confidential
or return any information which: (a) is known or available through other lawful
sources, not bound by a confidentiality agreement with the disclosing party; (b)
is or becomes publicly known through no fault of the receiving party or its
agents; (c) is required to be disclosed pursuant to an order or request of a
judicial or governmental authority (provided the disclosing party is given
reasonable prior notice of the order or request and the purpose of the
disclosure); or (d) is developed by the receiving party independently of the
disclosure by the disclosing party. Notwithstanding anything to the contrary
herein, Buyer and its affiliates shall, in accordance with their respective
legal obligations, including but not limited to filings permitted or required by
the Securities Act of 1933 and the Securities and Exchange Act of 1934, the
NASDAQ National Market and other similar regulatory bodies, make (i) such press
releases and other public statements and announcements ("Releases") as Buyer or
its affiliates deems necessary and appropriate in connection with this Agreement
and the transactions contemplated hereby, and (ii) any and all statements Buyer
deems in its sole judgment to be appropriate in any and all filings,
prospectuses and other similar documents. Buyer shall provide Seller with a copy
of any Releases before any publication of same. Seller may make comments to
Buyer with respect to any such Releases, provided however Buyer is not required
to incorporate any such comments into the Releases. Notwithstanding the
foregoing, any and all information required to be kept confidential pursuant to
this Section 10.1 may be disclosed by Buyer to any prospective assignee of
Buyer, provided that such prospective assignee agrees to abide by the terms of
this Section 10.1 with regard to such information disclosed to it, and such
assignee has been approved by Seller as set forth in Section 17.4.
10.2 COOPERATION. Subject to express limitations contained elsewhere
herein, Buyer and Seller agree to cooperate fully with one another in taking any
reasonable actions (including without limitation,
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reasonable actions to obtain the required consent of any governmental
instrumentality or any third party) necessary or helpful to accomplish the
transactions contemplated by this Agreement, including but not limited to the
satisfaction of any condition to closing set forth herein.
10.3 CONTROL OF STATION. Subject to Buyer's time brokering of the Stations
pursuant to the Time Brokerage Agreement, Buyer shall not, directly or
indirectly, control, supervise or direct the operations of the Stations prior to
the Closing. Such operations, including complete control and supervision of all
Stations programs, employees and policies, shall be the sole responsibility of
Seller.
10.4 CONSENTS TO ASSIGNMENT. To the extent that any Contract identified in
the Schedules is not capable of being sold, assigned, transferred, delivered or
subleased without the waiver or consent of any third person (including a
government or governmental unit), or if such sale, assignment, transfer,
delivery or sublease or attempted sale, assignment, transfer, delivery or
sublease would constitute a breach thereof or a violation of any law or
regula-tion, this Agreement and any assignment executed pursuant hereto shall
not constitute a sale, assignment, transfer, delivery or sublease or an
attempted sale, assignment, transfer, delivery or sublease thereof. Subject to
the provisions of Section 11.6, in those cases where consents, assignments,
releases and/or waivers have not been obtained at or prior to the Closing to the
transfer and assignment to Buyer of the Contracts, this Agreement and any
assignment executed pursuant hereto, to the extent permitted by law, shall
constitute an equitable assignment by Seller to Buyer of all of Seller's rights,
benefits, title and interest in and to the Contracts, and where necessary or
appropriate, Buyer shall be deemed to be Seller's agent for the purpose of
completing, fulfilling and discharging all of Seller's rights and liabilities
arising after the Closing Date under such Contracts. Seller shall use its best
efforts to provide Buyer with the financial and business benefits of such
Contracts (including, without limitation, permitting Buyer to enforce any rights
of Seller arising under such Contracts), and Buyer shall, to the extent Buyer is
provided with the benefits of such Contracts, assume, perform and in due course
pay and discharge all debts, obligations and liabilities of Seller under such
Contracts to the extent that Buyer was to assume those obligations pursuant to
the terms hereof.
10.5 FILINGS. In addition to the covenants of the parties set forth in
Article 5 hereto, as promptly as practicable after the execution of this
Agreement, Buyer and Seller shall use their reasonable best efforts to obtain,
and to cooperate with each other in obtaining, all authorizations, consents,
orders and approvals of any governmental authority that may be or become
necessary in connection with the consummation of the transactions contemplated
by this Agreement, and to take all reasonable actions to avoid the entry of any
order or decree by any governmental authority prohibiting the consummation of
the transactions contemplated hereby, including without limitation, any reports
or notifications that may be required to be filed with the FCC or to be filed
under the HSR Act with the Federal Trade Commission and the Antitrust Division
of the Department of Justice, and each shall furnish to one another all such
information in its possession as may be neces sary for the completion of the
reports or notifications to be filed by the other.
10.6 BULK SALES LAWS. Seller agrees to indemnify Buyer and hold it
harmless from any and all loss, cost, damage and expense (including but not
limited to, reasonable attorney's fees) sustained by Buyer as a result of any
failure of Seller to comply with any "bulk sales" or similar laws.
10.7 EMPLOYEE MATTERS. The parties agree that this Section 10.7 shall be
subject to the rights and obligations of the parties set forth in, and any prior
actions taken by the parties pursuant to, the Time Brokerage Agreement. The
parties acknowledge and agree that Buyer shall have the right (but not the
obligation) to interview and to elect which of the employees, if any, of Seller
that it will hire. In that regard, Seller shall provide Buyer access to its
personnel records and personnel files, and shall provide such other information
regarding Seller's employees as Buyer may reasonably request at least two weeks
prior to the commencement of the Time Brokerage Agreement. Buyer shall have the
sole and exclusive right to establish the wage, any other compensation and all
other terms and conditions of employment of any person hired by Buyer. Seller
shall be responsible for the payment of all compensation and accrued employee
benefits payable to all employees through the Closing Date. Seller also shall be
responsible for
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providing any notice required by any state statute requiring notice to
terminated or laid off employees, whether such notice is required to be given
before or after the Closing Date. All employees of Seller who are offered and
accept employment with Buyer shall be considered terminated employees of Seller
and shall not be entitled to receive from Buyer credit for any accrued vacation
days, sick days, personal days, paid time off or other such days. Seller
acknowledges and agrees that, it, and not Buyer, is and shall after Closing
remain solely responsible for any and all wages, compensation, commission,
bonuses, severance pay, insurance, supplemental pension, deferred compensation,
retirement and any other benefits, premiums and claims, due, to become due,
committed, accrued or otherwise promised to any person who, as of the Closing
Date, is a retiree, former employee, current employee of Seller, relating to the
period up to and including the Closing Date. Buyer, as purchaser of the Stations
Assets, shall assume no employee benefit plans, programs, policies, or
practices, whether or not set forth in writing, maintained by Seller at any
time.
10.8 SELLER REGISTRATION STATEMENT. (a) Promptly after the SEC's declared
effectiveness of the registration statement on Form S-4 relating to the
transaction between Jacor and Premiere Radio Networks, Inc., Buyer and Seller
shall cooperate to prepare and file with the SEC a registration statement on
Form S-4 relating to the Stock Consideration issuable at the Closing Date (the
"Registration Statement") subject, however, to deferral until such time as Buyer
and Seller may reasonably agree in writing. As soon as practicable following
receipt of final comments from the staff of the SEC on the Registration
Statement (or advice that such staff will not review such filing), Buyer shall
use its best efforts to have the Registration Statement declared effective by
the SEC and to maintain the effectiveness of such Registration Statement until
the Closing Date. Promptly after the effectiveness of the Registration
Statement, Seller shall mail the prospectus included in the Registration
Statement to all the partners of Seller. Buyer and Seller shall cooperate with
each other in the preparation of the Registration Statement and shall advise the
other in writing if, at any time prior to the Closing Date any such party shall
obtain knowledge of any facts that might make it necessary or appropriate to
amend or supplement the Registration Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. Notwithstanding the foregoing, each party shall be responsible
for the information and disclosures which it makes or incorporates by reference
in all regulatory filings, and the Registration Statement. Seller shall pay
one-half of the first Five Hundred Thousand Dollars ($500,000) of all expenses
and filing fees relating to the Registration Statement up to a maximum amount of
$250,000. Such fees and expenses shall not include any of Buyer's in-house
allocation of fees or expenses.
10.9 REGISTRATION AGREEMENT. Prior to the Closing Date, the parties will
enter into an agreement providing for shelf registration of resale of the shares
of Jacor common stock comprising the Stock Consideration substantially in the
form of the Registration Agreement attached as Exhibit I.
ARTICLE 11
CONDITIONS OF CLOSING BY BUYER
The obligations of Buyer hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
11.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
11.1.1 All representations and warranties of Seller made in this
Agreement or in any Exhibit or Schedule to this Agreement and delivered
pursuant hereto, shall be true and complete in all material respects as of
the date hereof and on and as of the Closing Date as if made on and as of
that date, except for changes expressly permitted or contemplated by the
terms of this Agreement, or changes that result from Buyer's actions under
the Time Brokerage Agreement.
11.1.2 All of the terms, covenants and conditions to be complied with
and performed by Seller on or prior to the Closing Date shall have been
complied with or performed in all material respects.
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11.1.3 Buyer shall have received a certificate, dated as of the Closing
Date, from Seller, executed by the partners of Seller, to the effect that:
(a) the representations and warranties of Seller contained in this Agreement
are true and complete in all material respects on and as of the Closing Date
as if made on and as of that date; and (b) Seller has complied with or
performed in all material respects all terms, covenants and conditions to be
complied with or performed by it on or prior to the Closing Date.
11.2 GOVERNMENTAL CONSENTS. The FCC Consent shall have been obtained and,
subject to the provisions of Section 4.1 hereof, shall have become a Final
Order.
11.3 GOVERNMENTAL AUTHORIZATIONS. Seller shall be the holder of the
Stations Licenses and all other licenses, permits and other authorizations
listed in SCHEDULE 7.4, and there shall not have been any modification of any of
such licenses, permits and other authorizations which has an adverse effect on
any of the Stations or the operations thereof. No application shall be pending
for the renewal of any of the Stations Licenses. No proceeding shall be pending
which seeks or the effect of which reasonably could be to revoke, cancel, fail
to renew, suspend or adversely modify any of the Stations Licenses or any other
licenses, permits or other authorizations listed in SCHEDULE 7.4.
11.4 ADVERSE PROCEEDINGS. No suit, action, claim or governmental
proceeding shall be pending or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, any party hereto which: (a) would render it unlawful, as of
the Closing Date, to effect the transactions contemplated by this Agreement in
accordance with its terms; (b) questions the validity or legality of any
transaction contemplated hereby; (c) seeks to enjoin any transaction
contemplated hereby; (d) seeks material damages on account of the consummation
of any transaction contemplated hereby; or (e) is a petition of bankruptcy by or
against Seller, an assignment by Seller for the benefit of its creditors, or
other similar proceeding.
11.5 THIRD-PARTY CONSENTS. All Contracts and Real Estate Contracts shall
be in full force and effect on the Closing Date. Seller shall have obtained and
shall have delivered to Buyer all third-party consents to the assignment of the
Material Contracts and Real Estate Contracts, and an estoppel certificate from
the lessor under each of the Real Estate Contracts in substantially the form
attached hereto as Exhibit G.
11.6 CLOSING DOCUMENTS. Seller shall have delivered or caused to be
delivered to Buyer, on the Closing Date, all deeds, bills of sale, endorsements,
assignments and other instruments of conveyance and transfer reasonably
satisfactory in form and substance to Buyer, effecting the sale, transfer,
assignment and conveyance of the Stations Assets to Buyer, including, without
limitation, each of the documents required to be delivered by them pursuant to
Article 14.
11.7 ENVIRONMENTAL AUDIT. Within forty-five days after the date of this
Agreement, Buyer shall have received a completed Phase I environmental audit
report (the "Phase I Report") at Buyer's sole expense regarding the Real Estate
which reports shall be satisfactory to Buyer in all respects.
11.8 TITLE INSURANCE AND SURVEYS. Buyer shall have obtained a commitment
for an ALTA title insurance policy and a staked on ground ALTA survey for each
of the Real Estate (the "Policies" and "Surveys" respectively). Buyer shall pay
all costs and expenses of obtaining the Policies and Surveys, including without
limitation, the title insurance premiums associated therewith. The Policies and
Surveys shall in all respects be acceptable to Buyer.
11.9 REAL ESTATE. Within forty-five days after the date of this Agreement,
Buyer shall have determined to its sole satisfaction that services for
utilities, including without limitation, for water and sewer service, telephone
service, electric and/or gas service, and sanitary services are sufficient to
service the current use of the Real Estate and that all buildings, structures,
towers, antennae, improvements, and fixtures comprising part of the real
properties leased by Seller are in good and technically sound operating
condition, have no latent structural or mechanical defects of material
significance and are suitable for the purposes for which they are being used.
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11.10 NO ADVERSE CHANGE. No material adverse change in condition or status
of the Stations or Stations Assets shall have occurred, or be threatened to
occur (i) which have not been caused by Buyer's actions under the Time Brokerage
Agreement; or (ii) which have not been as a result of matters generally
affecting the radio broadcast industry.
11.11 BOARD AND BANK CONSENT. Within thirty (30) days from the date of
this Agreement: (a) the Boards of Directors of Buyer and Jacor Communications,
Inc. ("Jacor") shall have approved and ratified this Agreement and the
consummation of the transactions contemplated hereby; and (b) the lenders of
Buyer, Jacor and any of their affiliates shall have granted in writing their
consent and any required waivers to the transactions contemplated hereby.
11.12 TIME BROKERAGE AGREEMENT COMPLIANCE. From the date hereof through
the Closing Date, the Time Brokerage Agreement shall not have been terminated by
Buyer as permitted by the Time Brokerage Agreement as a result of Sellers'
material noncompliance with its obligations under the Time Brokerage Agreement.
11.13 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
and any post-effective amendments required or deemed necessary by Jacor in
accordance with the undertakings to be made by Jacor to the SEC pursuant to Item
512 of the Registration S-K shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending the effectiveness
of the Registration Statement shall have been issued by the SEC and remain in
effect.
11.14 WLTF(FM) TOWER AND TRANSMITTER LEASE. Seller shall have given
written notice to renew the Lease Agreement between Cannell Communications, L.P.
and Booth American Company for the WLTF(FM) Tower and Transmitter Site on or
before May 10, 1997 and Seller shall provide Buyer with written evidence of such
renewal notice on or before May 15, 1997.
ARTICLE 12
CONDITIONS OF CLOSING BY SELLER
The obligations of Seller hereunder are, at its option, subject to
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
12.1 REPRESENTATIONS, WARRANTIES AND COVENANTS.
12.1.1 All representations and warranties of Buyer made in this
Agreement or in any Exhibit, Schedule or document delivered pursuant hereto,
shall be true and complete in all material respects as of the date hereof
and on and as of the Closing Date as if made on and as of that date, except
for changes expressly permitted or contemplated by the terms of this
Agreement.
12.1.2 All the terms, covenants and conditions to be complied with and
performed by Buyer on or prior to the Closing Date shall have been complied
with or performed in all material respects.
12.1.3 Seller shall have received a certificate, dated as of the
Closing Date, executed by the President of Buyer, to the effect that: (a)
the representations and warranties of Buyer contained in this Agreement are
true and complete in all material respects on and as of the Closing Date as
if made on and as of that date; and (b) that Buyer has complied with or
performed in all material respects all terms, covenants and conditions to be
complied with or performed by it on or prior to the Closing Date.
12.2 GOVERNMENTAL CONSENTS. The FCC Consent shall have been obtained and,
subject to the provisions of Section 4.1 hereof, shall have become a Final
Order.
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12.3 ADVERSE PROCEEDINGS. No suit, action, claim or governmental
proceeding shall be pending or threatened against, and no other decree or
judgment of any court, agency or other governmental authority shall have been
rendered (and remain in effect) against, any party hereto or against Jacor
which: (a) would render it unlawful, as of the Closing Date, to effect the
transactions contemplated by this Agreement in accordance with its terms; (b)
questions the validity or legality of any transaction contemplated hereby; (c)
seeks to enjoin any transaction contemplated hereby; (d) seeks material damages
on account of the consummation of any transaction contemplated hereby; or (e) is
a petition of bankruptcy by or against Buyer, an assignment by Buyer for the
benefit of its creditors or other similar proceeding.
12.4 CLOSING DOCUMENTS. Buyer shall have delivered or caused to be
delivered to Seller, on the Closing Date, each of the documents and Purchase
Price required to be delivered by it pursuant to Article 14.
12.5 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have become effective in accordance with the provisions of the Securities
Act and no stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and remain in effect.
12.6 REGISTRATION AGREEMENT. Seller and Jacor shall have entered into the
Agreement described in Section 10.9.
12.7 BUYER'S CONDITIONS. Buyer shall have satisfied or waived the
conditions of Closing set forth in Sections 11.8, 11.9 and 11.11 hereof.
ARTICLE 13
TRANSFER TAXES; FEES AND EXPENSES
13.1 EXPENSES. Except as set forth in Sections 10.8, 13.2 and 13.3 hereof
or otherwise expressly set forth in this Agreement, each party hereto shall be
solely responsible for all costs and expenses incurred by it in connection with
the negotiation, preparation and performance of and compliance with the terms of
this Agreement including, but not limited to the costs and expenses in curred
pursuant to Article 5 hereof and the fees and disbursements of counsel and other
advisors.
13.2 TITLE AND TRANSFER TAXES AND SIMILAR CHARGES. All costs of
transferring the Stations Assets in accordance with this Agreement, including
recordation, transfer and documentary taxes and fees, and any excise, sales or
use taxes shall be paid by Seller.
13.3 GOVERNMENTAL FILING OR GRANT FEES. Any filing or grant fees imposed
by any governmental authority the consent of which or the filing with which is
required for the consummation of the transactions contemplated hereby shall be
paid equally by Buyer and Seller.
ARTICLE 14
DOCUMENTS TO BE DELIVERED AT CLOSING
14.1 SELLER'S DOCUMENTS. At the Closing, Seller shall deliver or cause to
be delivered to Buyer the following:
14.1.1 Certified resolutions of the partners of Seller approving the
execution and delivery of this Agreement and authorizing the consummation of
the transactions contemplated hereby;
14.1.2 A certificate of Seller dated the Closing Date, in the form
described in Section 11.1.3;
14.1.3 Governmental certificates showing that (a) Seller is duly
organized and in good standing in the State of Delaware; (b) Booth American
Company and Booth Broadcasting Inc. are duly organized and in good standing
in the State of Michigan; (c) Broadcast Alchemy, L.P. is duly organized and
in good standing in the State of Delaware; (d) the Seller has filed all
returns, paid all
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taxes due thereon and is currently subject to no assessment in the States of
their organization, each certified as of a date not more than ten (10)
business days before the Closing Date;
14.1.4 Such certificates, bills of sale, general warranty deeds,
assignments, documents of title and other instruments of conveyance,
assignment and transfer (including without limitation any necessary consents
to conveyance, assignment or transfer), and lien releases, all in form
satisfactory to Buyer and Buyer's counsel, as shall be effective to vest in
Buyer good, marketable and insurable title in and to the Stations Assets,
free, clear and unencumbered.
14.1.5 An Assignment and Assumption Agreement in the form of Exhibit B
effectuating the assignment and assumption of the Assumed Liabilities (the
"Assignment and Assumption Agreement").
14.1.6 A Noncompetition and Confidentiality Agreement in the form of
Exhibit C between Buyer, Seller, Broadcast Alchemy, L.P. and Booth American
Company (the "Noncompetition Agreement").
14.1.7 At the time and place of Closing, originals and all copies of
all program, operations, transmission or maintenance logs and all other
records required to be maintained by the FCC with respect to the Stations,
including the public files of the Stations, shall be left at the Stations
and thereby delivered to Buyer;
14.1.8 A written opinion of Seller's general counsel, Frost & Jacobs,
with terms and conditions customary for transactions that are similar to the
transactions contemplated by this Agreement and which are mutually
acceptable to Buyer and Seller, and a written opinion of Seller's FCC
counsel, Fisher Wayland et al., with terms and conditions customary for
transactions that are similar to the transactions contemplated by this
Agreement and which are mutually acceptable to Buyer and Seller, both dated
as of the Closing Date;
14.1.9 Estoppel certificates, if any, obtained from the lessors under
the Real Estate Contracts, substantially in the form of Exhibit G; and
14.1.10 Such additional information, materials, agreements, documents
and instruments as Buyer and its counsel may reasonably request in order to
consummate the Closing.
14.2 BUYER'S DOCUMENTS. At the Closing, Buyer shall deliver or cause to be
delivered to Seller the following:
14.2.1 Certified resolutions of the Board of Directors of Buyer
approving the execution and delivery of this Agreement and authorizing the
consummation of the transactions contemplated hereby;
14.2.2 A certificate of Buyer, dated the Closing Date, in the form
described in Section 12.1.3.
14.2.3 The Assignment and Assumption Agreement;
14.2.4 The Noncompetition Agreement;
14.2.5 A written opinion of Buyer's counsel, Graydon, Head & Ritchey,
with terms and conditions customary for transactions that are similar to the
transactions contemplated by this Agreement;
14.2.6 Intentionally Deleted
14.2.7 Intentionally Deleted
14.2.8 The Purchase Price in accordance with Section 3.1 hereof
consisting of wired funds and the Stock Consideration.
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<PAGE>
14.2.9 Such additional information, materials, agreement, documents and
instruments as Seller and its counsel may reasonably request in order to
consummate the Closing.
ARTICLE 15
SURVIVAL; INDEMNIFICATION; ETC.
15.1 SURVIVAL OF REPRESENTATIONS, ETC. It is the express intention and
agreement of the parties to this Agreement that all covenants and agreements
(together, "Agreements") and all representations and warranties (together,
"Warranties") made by Buyer, Seller in this Agreement shall survive the Closing
(regardless of any knowledge, investigation, audit or inspection at any time
made by or on behalf of Buyer or Seller) as follows:
15.1.1 The Agreements shall survive the Closing without limitation.
15.1.2 The Warranties in Sections 6.2, 6.6, 7.2, the second sentence of
7.7, the first sentence of 7.8.3, 7.18, 7.21, and 7.24 shall survive the
Closing without limitation. The Warranties in Section 7.11 shall survive the
Closing for the period of the applicable statute of limitations plus any
extensions or waivers granted or imposed with respect thereto.
15.1.3 The Warranties in Section 7.6 or otherwise relating to the
federal, state, local or foreign tax obligations of Seller shall survive the
Closing for the period of the applicable statute of limitations plus any
extensions or waivers granted or imposed with respect thereto.
15.1.4 All other Warranties shall survive for a period of twelve (12)
months from the Closing Date.
15.1.5 The right of any party to recover Damages (as defined in Section
15.2.1) pursuant to Section 15.2 shall not be affected by the expiration of
any Warranties as set forth herein, provided that notice of the existence of
any Damages (but not necessarily the fixed amount of any such Damages) has
been given by the indemnified party to the indemnifying party prior to such
expiration.
15.1.6 Notwithstanding any provision hereof to the contrary, there
shall be no contractual time limit in which Buyer or Seller may bring any
action for actual fraud (a "Fraud Action"), regardless of whether such
actual fraud also included a breach of any Agreement or Warranty; provided,
however, that any Fraud Action must be brought within the period of the
applicable statute of limitations plus any extensions or waivers granted or
imposed with respect thereto.
15.2 INDEMNIFICATION.
15.2.1 Seller shall defend, indemnify and hold harmless Buyer from and
against any and all losses, costs, damages, liabilities and expenses,
including reasonable attorneys' fees and expenses ("Damages"), incurred by
Buyer arising out of or related to: (a) any breach of the Agreements or
Warranties given or made by Seller in this Agreement; (b) the Retained
Liabilities; (c) any failure of the parties to comply with any "bulk sales"
laws applicable to the transactions contemplated hereby; (d) the conduct of
the business and operations of the Stations or any portion thereof by Seller
or the use or ownership of any of the Stations Assets by Seller prior to the
Closing Date, but excluding all Damages arising from Buyer's actions under
the Time Brokerage Agreement; and (e) the failure of Buyer to hire any
employee of Seller.
Notwithstanding the foregoing provisions of this Section 15.2.1 Seller
shall have no obligation to defend, indemnify and hold harmless Buyer for
Damages arising out of any matter described in clause (a) of the immediately
preceding paragraph until and then only to the extent that, the aggregate
Damages on account thereof, exceed $250,000.
15.2.2 Buyer shall defend, indemnify and hold harmless Seller from and
against any and all Damages incurred by Seller arising out of or related to:
(a) any breach of the Agreements and
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<PAGE>
Warranties given or made by Buyer in this Agreement; (b) the Assumed
Liabilities; and (c) the conduct of the business and operations of the
Stations or any portion thereof or the use or ownership of any of the
Stations Assets on or after the Closing Date.
Notwithstanding the foregoing provisions of this Section 15.2.1 Buyer
shall have no obligation to defend, indemnify and hold harmless Seller for
Damages arising out of any matter described in clause (a) of the immediately
preceding paragraph until and then only to the extent that, the aggregate
Damages on account thereof, exceed $250,000. The foregoing does not apply to
Buyer's obligation to pay the Purchase Price described in Article 3.
15.3 PROCEDURES: THIRD PARTY AND DIRECT INDEMNIFICATION CLAIMS. The
indemnified party agrees to give written notice within a reasonable time to the
indemnifying party of any demand, suit, claim or assertion of liability by third
parties or other circumstances that could give rise to an indemnification
obligation hereunder against the indemnifying party (hereinafter collectively
"Claims," and individually a "Claim"), it being understood that the failure to
give such notice shall not affect the indemnified party's right to
indem-nification and the indemnifying party's obligation to indemnify as set
forth in this Agreement, unless the indemnifying party's ability to contest,
defend or settle with respect to such Claim is thereby demonstrably and
materially prejudiced. The parties also agree that any claim for Damages arising
directly between the parties relating to this Agreement may be brought at any
time within the period specified in Section 15.1, and that the only notice
required with respect thereto shall be as specified in Section 15.1.5.
The obligations and liabilities of the parties hereto with respect to their
respective indemnities pursuant to Section 15.2 resulting from any Claim shall
be subject to the following additional terms and conditions:
15.3.1 The indemnifying party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense or
opposition to such Claim.
15.3.2 In the event that the indemnifying party shall elect not to
undertake such defense or opposition, or within ten (10) days after notice
of any such Claim from the indemnified party shall fail to defend or oppose,
the indemnified party (upon further written notice to the indemnifying
party) shall have the right to undertake the defense, opposition, compromise
or settlement of such Claim, by counsel or other representatives of its own
choosing, on behalf of and for the account and risk of the indemnifying
party (subject to the right of the indemnifying party to assume defense of
or opposition to such Claim at any time prior to settlement, compromise or
final determination thereof).
15.3.3 Anything in this Section 15.3 to the contrary notwith-standing:
(a) the indemnified party shall have the right, at its own cost and expense,
to participate in the defense, opposition, compromise or settlement of the
Claim; (b) the indemnifying party shall not, without the indemnified party's
written consent, settle or compromise any Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the giving
by the claimant or the plaintiff to the indemnified party of a release from
all liability in respect of such Claim; and (c) in the event that the
indemnifying party undertakes defense of or opposition to any Claim, the
indemnified party, by counsel or other representative of its own choosing
and at its sole cost and ex pense, shall have the right to consult with the
indemnifying party and its counsel or other representatives concerning such
Claim and the indemnifying party and the indemnified party and their
respective counsel or other representatives shall cooperate in good faith
with respect to such Claim.
15.3.4 No undertaking of defense or opposition to a Claim shall be
construed as an acknowledgment by such party that it is liable to the party
claiming indemnification with respect to the Claim at issue or other similar
Claims.
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<PAGE>
ARTICLE 16
TERMINATION RIGHTS
16.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing as follows:
16.1.1 Upon the mutual written consent of Buyer and Seller this
Agreement may be terminated on such terms and conditions as so agreed; or
16.1.2 By written notice of Buyer to Seller if Seller breaches in any
material respect any of its representations or warranties or defaults in any
material respect in the observance or in the due and timely performance of
any of its covenants or agreements herein contained and such breach or
default shall not be cured within thirty (30) days of the date of notice of
breach or default served by Buyer; or
16.1.3 By written notice of Seller to Buyer if Buyer breaches in any
material respect any of its representations or warranties or defaults in any
material respect in the observance or in the due and timely performance of
any of its covenants or agreements herein contained and such breach or
default shall not be cured within thirty (30) days of the date of notice of
breach or default served by Seller; or
16.1.4 By written notice of Buyer to Seller if the FCC denies the FCC
Application or designates it for a hearing, or by Seller to Buyer, if the
FCC denies the FCC Application or desig nates it for a hearing neither as a
result of any action or inaction by Seller; or
16.1.5 By written notice of Buyer to Seller, or by Seller to Buyer, if
any court of competent jurisdiction shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, or by Buyer or
Seller, if any court, legislative body or governmental or regulatory
authority has taken action that would make the consummation of the
transactions contemplated hereby illegal; or
16.1.6 By written notice of Buyer to Seller, or by Seller to Buyer, if
the Closing shall not have been consummated on or before March 1, 1998.
16.1.7 By written notice of Buyer to Seller if it shall become apparent
in Buyer's judgment reasonably exercised that any condition to Buyer's
obligation to close as set forth in Article 11 hereof will not be satisfied
on or before March 1, 1998.
16.1.8 By written notice of Buyer to Seller under the conditions set
forth in Section 9.2 hereof.
Notwithstanding the foregoing, no party hereto may effect a termination
hereof if such party is in material default or breach of this Agreement.
16.2 LIABILITY. Except as set forth in Section 17.1 below, the termination
of this Agreement under Section 16.1 shall not relieve any party of any
liability for breach of this Agreement prior to the date of termination.
16.3 MONETARY DAMAGES, SPECIFIC PERFORMANCE AND OTHER REMEDIES. The
parties recognize that if Seller fails to perform under the provisions of this
Agreement, monetary damages alone will not be adequate to compensate Buyer for
its injury. Buyer shall therefore be entitled to obtain specific performance of
the terms of this Agreement in addition to any other remedies, including but not
limited to monetary damages, that may be available to it. If any action is
brought by Buyer to enforce this Agreement, Seller shall waive the defense that
there is an adequate remedy at law.
16.4 SELLER'S DAMAGES. If the parties hereto shall fail to consummate this
Agreement on the Closing Date due solely to Buyer's material breach of this
Agreement, and Seller is not at that time in material breach hereof, then Seller
shall be entitled to obtain specific performance of the terms of this Agreement
in addition to any other remedies including, but not limited to, monetary
damages that may be available to it.
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<PAGE>
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 RISK OF LOSS. The risk of loss or damage to any of the Stations
Assets prior to the Closing Date shall be upon Seller. Seller shall repair,
replace and restore any such damaged or lost Stations Asset to its prior
condition as soon as possible and in no event later than thirty (30) days
following the loss or damage; provided, however, that in the event any loss or
damage of the Stations Assets exists on the Closing Date, the Buyer at its
option may extend the Closing Date until such time as Seller shall have
repaired, replaced and restored any such damaged or lost Stations Asset to its
prior condition or alternatively Buyer may deduct from the Purchase Price that
amount which Buyer and Seller mutually reasonably determine to be sufficient to
cover any such loss or damage after the payment by Seller to Buyer of any
insurance proceeds related thereto and close the transaction on the Closing
Date.
17.2 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS. Unless the context
otherwise requires: (a) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement; (b) each term defined in this Agreement has the meaning assigned to
it; (c) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect on the date hereof; (d) "or" is disjunctive but not
necessarily exclusive; (e) words in the singular include the plural and vice
versa; (f) the term "affiliate" has the meaning given it in Rule 12b-2 of
Regulation 12B under the Securities Exchange Act of 1934, as amended; and (g)
all references to "$" or dollar amounts will be to lawful currency of the United
States of America.
17.3 FURTHER ASSURANCES. After the Closing, Seller shall from time to
time, at the request of and without further cost or expense to Buyer, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as may reasonably be requested in order more effectively to
consummate the transactions contemplated hereby to vest in Buyer good and
marketable title to the Stations Assets being transferred hereunder, free, clear
and unencumbered, and Buyer shall from time to time, at the request of and
without further cost or expense to Seller, execute and deliver such other
instruments and take such other actions as may reasonably be requested in order
more effectively to relieve Seller of any obligations being assumed by Buyer
hereunder.
17.4 BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither Buyer nor Seller may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other party, which consent will not be unreasonably withheld.
Notwithstanding anything to the contrary herein, Buyer may assign its interest
in this Agreement to a third party lender without the requirement that Buyer
obtain Seller's consent. In the event Buyer finds it necessary or is required to
provide to a third party lender a collateral assignment of the Buyer's interest
in this Agreement and/or any related documents, Seller shall cooperate with the
Buyer and any third party lender requesting such assignment including but not
limited to Seller signing a consent and acknowledgment of such assignment. All
covenants, agreements, statements, representations, warranties and indemnities
in this Agreement by and on behalf of any of the parties hereto shall bind and
inure to the benefit of their respective successors and permitted assigns of the
parties hereto.
17.5 AMENDMENTS. No amendment, waiver of compliance with any provision or
condition hereof or consent pursuant to this Agreement shall be effective unless
evidenced by an instrument in writing signed by the party against whom
enforcement of any waiver, amendment, change, extension or discharge is sought.
17.6 HEADINGS. The headings set forth in this Agreement are for
convenience only and will not control or affect the meaning or construction of
the provisions of this Agreement.
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17.7 GOVERNING LAW. The construction and performance of this Agreement
shall be governed by the laws of the State of Ohio without giving effect to the
choice of law provisions thereof. Any action, suit or proceeding brought by any
party to this Agreement relating to or arising out of this Agreement or any
other agreement, instrument, certificate or other document delivered pursuant
hereto (or the enforcement hereof or thereof) must be brought and prosecuted as
to all parties in, and each of the parties hereby consents to service of
process, personal jurisdiction and venue in, the state and Federal courts of
general jurisdiction located in Hamilton County, Ohio.
17.8 INTENTIONALLY DELETED.
17.9 NOTICES. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing, including by
facsimile, and shall be deemed to have been duly delivered and received on the
date of personal delivery, on the third day after deposit in the U.S. mail if
mailed by registered or certified mail, postage prepaid and return receipt
requested, on the day after delivery to a nationally recognized overnight
courier service if sent by an overnight delivery service for next morning
delivery or when dispatched by facsimile transmission (with the facsimile
transmission confirmation being deemed conclusive evidence of such dispatch) and
shall be addressed to the following addresses, or to such other address as any
party may request, in the case of Seller, by notifying Buyer, and in the case of
Buyer, by notifying Seller:
<TABLE>
<S> <C>
To Buyer: Randy Michaels, President
Jacor Broadcasting Corporation
50 East RiverCenter Boulevard
12th Floor
Covington, Kentucky 41011
Fax: (606) 655-9345
Copy to: Graydon, Head & Ritchey
1900 Fifth Third Center
511 Walnut Street
Cincinnati, Ohio 45202
Attention: John J. Kropp, Esq.
Fax: (513) 651-3836
To Seller: Secret Communications Limited
Partnership
312 Walnut Street
Cincinnati, Ohio 45202
Attention: Frank E. Wood
Fax: (513) 621-3299
Copy to: Neil Ganulin, Esq.
Frost & Jacobs
2500 PNC Center
201 East Fifth Street
Cincinnati, Ohio 45202-4182
Fax: (513) 651-6981
And Copy to: Arthur J. Schiller, Esq.
Lane Industries, Inc.
One Lane Center
1200 Sherman Road
Northbrook, Illinois 60062
Fax: (847) 291-5803
</TABLE>
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<PAGE>
17.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by facsimile, each of which shall be deemed an original and
all of which together will constitute one and the same instrument.
17.11 NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity
other than the parties hereto and their successors or permitted assigns, any
rights or remedies under or by reason of this Agreement.
17.12 SEVERABILITY. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable law, this Agreement shall be
construed with the invalid, illegal or unenforceable provision deleted, and the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected or impaired thereby.
17.13 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto embody the
entire agreement and understanding of the parties hereto and supersede any and
all prior agreements, arrangements and understandings relating to the matters
provided for herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
JACOR BROADCASTING CORPORATION
By: _________/s/ Jerome L. Kersting_________
Name: __________Jerome L. Kersting__________
Title: ________Senior Vice President________
SECRET COMMUNICATIONS LIMITED PARTNERSHIP,
a Delaware limited partnership.
By: BROADCAST ALCHEMY, L.P.
a Delaware limited partnership
a General Partner
By: LANE BROADCASTING, INC.
a Delaware corporation
Its General Partner
By: ________/s/ Arthur J. Schiller_______
Print Name: ______Arthur J. Schiller_____
Title: _____________Secretary____________
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<PAGE>
ANNEX II
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
, 1997, by and among JACOR COMMUNICATIONS, INC., a Delaware
corporation ("Parent"), JACOR BROADCASTING CORPORATION, an Ohio corporation and
an indirect, wholly-owned subsidiary of Parent ("Acquisition"), SECRET
COMMUNICATIONS LIMITED PARTNERSHIP ("Seller"), BOOTH AMERICAN COMPANY, a
Delaware corporation ("Partner A"), BROADCAST ALCHEMY L.P., a Delaware limited
partnership ("Partner B"), and FRANK E. WOOD, ("Partner C"). Partner A, Partner
B, and Partner C are sometimes individually referred to herein as a "Partner"
and are sometimes collectively referred to herein as the "Partners."
A. Parent, Acquisition, and Seller entered into an Asset Purchase Agreement
dated as of April , 1997 (the "Asset Purchase Agreement"), which provides,
among other things, upon the terms and subject to the conditions thereof, that
Acquisition will acquire certain assets of Seller and that the Partners will
receive 750,000 shares of the Parent's common stock, $.01 par value (the
"Shares") in addition to certain cash consideration.
B. In the Asset Purchase Agreement, Parent, Acquisition and Seller agreed
to enter into this Agreement providing for shelf registration of resale of the
Shares.
NOW, THEREFORE, for and in consideration of the mutual promises herein made,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day that is not a Saturday, a Sunday or a legal
holiday on which banking institutions in the State of Ohio are not required to
be open.
"Controlling Persons": See Section 5(a) hereof.
"Damages": See Section 5(a) hereof.
"Delay Period": See Section 3(e) hereof.
"Distributee": See Section 6(e) hereof.
"Effectiveness Period": See Section 2(b) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute, and the rules and regulations of the SEC
promulgated thereunder.
"Indemnified Party": See Section 5(c) hereof.
"Indemnifying Party": See Section 5(c) hereof.
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<PAGE>
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" means the Shares issued to the Seller or the
Partners pursuant to the Asset Purchase Agreement or thereafter distributed by a
Partner to a Distributee, until in the case of any such security (i) it has been
effectively registered under Section 5 of the Securities Act and disposed of
pursuant to an effective registration statement under the Securities Act, (ii)
it has been transferred other than pursuant to Rule "4(1 1/2)" (or any similar
private transfer exemption) under the Securities Act or (iii) in the opinion of
counsel to the Parent or of counsel to a Partner, reasonably acceptable to
Parent, it may be transferred by a holder without registration pursuant to Rule
144 under the Securities Act or any successor rule without regard to either the
volume limitation or the manner of sale limitation contained in such rule.
"Registration Statement" means the registration statement of Parent that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations of the SEC
promulgated thereunder.
"Shelf Registration": See Section 2(a) hereof.
SECTION 2. SHELF REGISTRATION.
(a) Parent shall file with the SEC no later than ten business days after
Parent's receipt of written notice from a holder of Registrable Securities
informing Parent of the reasons why such holder is unable to sell all of the
holder's Registrable Securities without registration under the Securities
Act (excluding the manner of sale requirement contained in Rule 144), a
Registration Statement under the Securities Act relating to the Registrable
Securities, which Registration Statement shall provide for the sale by the
holders thereof of the Registrable Securities from time to time on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act (the
"Shelf Registration").
(b) Parent agrees to use its best efforts to cause the SEC to declare
the Registration Statement to be effective as soon as possible after the
filing of such Registration Statement. Parent agrees to use its best efforts
to keep the Registration Statement filed pursuant to this Section 2
continuously effective thereafter and usable for the resale of Registrable
Securities for a period ending on the earlier of (i) two years from the
Closing Date (as defined in the Asset Purchase Agreement), (ii) the first
date on which all the Registrable Securities covered by such Shelf
Registration have been sold pursuant to such Registration Statement and
(iii) the date on which all of the Shares cease to be Registrable Securities
(the "Effectiveness Period").
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<PAGE>
SECTION 3. REGISTRATION PROCEDURES.
(a) In connection with the registration obligations of Parent pursuant
to and in accordance with Section 2 hereof (and subject to Parent's rights
under this Section 3), Parent will use its reasonable best efforts to effect
such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto Parent shall as expeditiously as possible:
(i) prepare and file with the SEC such amendments (including
post-effective amendments) to the Registration Statement, and such
supplements to the Prospectus, as may be required by the rules,
regulations or instructions applicable to the Securities Act or the rules
and regulations thereunder during the applicable period in accordance
with the intended methods of disposition by the Partners thereof and
cause the Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act;
(ii) notify the selling holders of Registrable Securities promptly
and (if requested by any such person) confirm such notice in writing (A)
when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement
or any post-effective amendment, when the same has become effective, (B)
of any request by the SEC for amendments or supplements to the
Registration Statement or related Prospectus or for additional
information regarding such holder, (C) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose, (D) of the receipt by
Parent of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose, and (E) of the happening of any event
or the existence of any fact that requires the making of any changes in
such Registration Statement, Prospectus or document incorporated therein
by reference so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(iii) use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement, or
the lifting of any suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction in the United States;
(iv) furnish to one counsel for the Partners, without charge, (i) a
draft of any Prospectus, Prospectus supplement or post-effective
amendment relating to the Registration Statement in advance of filing
same with the SEC such that counsel will have a reasonable opportunity to
review and comment on same, PROVIDED, HOWEVER, that Parent shall not be
required to delay the filing of any such document with the SEC if in the
opinion of counsel to Parent, such filing must be made more promptly to
comply with applicable securities laws, rules and regulations, and (ii)
one conformed copy of the Registration Statement as declared effective by
the SEC and of each post-effective amendment thereto, in each case
including financial statements and schedules and all exhibits and reports
incorporated or deemed to be incorporated therein by reference; and such
number of copies of the preliminary prospectus, each amended preliminary
prospectus, each final Prospectus and each post-effective amendment or
supplement thereto, as the selling holders may reasonably request in
order to facilitate the disposition of the Registrable Securities covered
by the Registration Statement in conformity with the requirements of the
Securities Act;
(v) prior to any public offering of Registrable Securities, register
or qualify such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions in the United States as
any selling holder shall reasonably request in writing; and do any and
all other reasonable acts or things necessary or advisable to enable such
holders to consummate the disposition in such jurisdictions of such
Registrable Securities covered by the Registration
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Statement; PROVIDED, HOWEVER, that Parent shall in no event be required
to qualify generally to do business as a foreign corporation or as a
dealer in any jurisdiction where it is not at the time so qualified or to
execute or file a general consent to service of process in any such
jurisdiction where it has not theretofore done so or to take any action
that would subject it to general service of process or taxation in any
such jurisdiction where it is not then subject;
(vi) except during any Delay Period, upon the occurrence of any
event contemplated by paragraph 3(a)(ii)(B) or 3(a)(ii)(E) above, prepare
a supplement or post-effective amendment to each Registration Statement
or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, such Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and
(vii) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange or automated dealer
quotation system, if any, on which similar securities issued by Parent
are then listed.
(b) Parent may require each Partner of Registrable Securities as to
which any registration is being effected to furnish such information
regarding the distribution of such Registrable Securities and as to such
Partner as it may from time to time reasonably request. If any such
information with respect to any Partner is not furnished prior to the filing
of the Registration Statement, Parent may exclude such Partner's Registrable
Securities from such Registration Statement.
(c) Each holder of Registrable Securities (including, without
limitation, any Distributee) agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from Parent of the happening of
any event of the kind described in Section 3(a)(ii)(B), 3(a)(ii)(C),
3(a)(ii)(D) or 3(a)(ii)(E) hereof or upon notice of the commencement of any
Delay Period, such holder shall forthwith discontinue disposition of such
Registrable Securities covered by such Registration Statement or Prospectus
until such holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(a)(vi) hereof, or until it is advised
in writing by Parent that the use of the applicable Prospectus may be
resumed, and has received copies of any amended or supplemented Prospectus
or any additional or supplemental filings which are incorporated, or deemed
to be incorporated, by reference in such Prospectus and, if requested by
Parent, such holder shall deliver to Parent (at the expense of Parent) all
copies, other than permanent file copies then in such holder's possession,
of the Prospectus covering such Registrable Securities at the time of
receipt of such request.
(d) Each holder of Registrable Securities further agrees not to utilize any
material other than the applicable current Prospectus in connection with the
offering of Registrable Securities pursuant to a registration.
(e) The foregoing notwithstanding, Parent shall have the right in its sole
discretion, based on any valid business purpose (including, without limitation,
to avoid the disclosure of any corporate development that Parent is not
otherwise obligated to disclose or to coordinate such distribution with other
shareholders that have registration rights with respect to any securities of
Parent or with other distributions of Parent (whether for the account of Parent
or otherwise)), to suspend the use of the Registration Statement for a
reasonable length of time (a "Delay Period") and from time to time; PROVIDED,
that the aggregate number of days in all Delay Periods occurring in any period
of twelve consecutive months shall not exceed 120. Parent shall provide written
notice to each holder of Registrable Securities covered by the Registration of
the beginning and end of each Delay Period and such holders shall cease all
disposition efforts with respect to Registrable Securities held by them
immediately upon receipt of notice of the beginning of any Delay Period.
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(f) Parent may, in its sole discretion, combine any offering of the
Registrable Securities with any offering of other securities of Parent (whether
for the account of Parent or otherwise), PROVIDED, that (A) the Partners shall
have consented to the inclusion of such other securities, (B) the offering is
pursuant to a firm commitment underwriting and the managing or principal
underwriter shall have consented to the inclusion of such other securities, and
(C) all Registrable Securities requested to be registered and included in the
offering shall be included.
(g) Following the effectiveness of a Registration Statement through the end
of the Effectiveness Period, each holder of Registerable Securities agrees, if
such holder is requested by an underwriter in an underwritten offering for
Parent (whether for the account of Parent or otherwise), not to effect any
public sale or distribution of any of Parent's securities during such time
period as Parent's directors are also required to refrain from any such sale or
distribution.
SECTION 4. REGISTRATION EXPENSES.
Whether or not the Registration Statement becomes effective, Parent shall
pay all costs, fees and expenses incident to Parent's performance of or
compliance with this Agreement, including, without limitation, (i) all
registration and filing fees, (ii) fees and expenses of compliance with
securities or Blue Sky laws, (iii) printing expenses (including, without
limitation, expenses of printing of prospectuses if the printing of prospectuses
is requested by the holders of a majority of the Registrable Securities included
in the Registration Statement), (iv) fees and disbursements of counsel for
Parent, and (v) fees and disbursements of all independent certified public
accountants of Parent and all other Persons retained by Parent in connection
with the Registration Statement. Notwithstanding the foregoing, the fees and
expenses of counsel to, or any other Persons retained by, any holder of
Registrable Securities, and any discounts, commissions, underwriting or advisory
fees, brokers' fees or fees of similar securities industry professional
(including any "qualified independent underwriter" retained for the purpose of
Rule 2720(c) of the National Association of Securities Dealers, Inc.) relating
to the distribution of the Registrable Securities, will be payable by such
holder and Parent will have no obligation to pay any such amounts.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY PARENT. Parent agrees to indemnify and hold
harmless, to the full extent permitted by law, each Partner, its partners,
officers, directors, trustees, stockholders, employees, agents, and investment
advisers, and each Person who controls such Partner within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Partner, together with the
partners, officers, directors, trustees, stockholders, employees, and agents of
such controlling Person (collectively, the "Controlling Persons"), from and
against all losses, claims, damages, liabilities, and expenses (including,
without limitation, any legal or other fees and expenses reasonably incurred by
any Partner or any such Controlling Person in connection with defending or
investigating any action or claim in respect thereof) (collectively, the
"Damages") to which such Partner, its partners, officers, directors, trustees,
stockholders, employees, agents, and investment advisers, and any such
Controlling Person may become subject under the Securities Act or otherwise,
insofar as such Damages (or proceedings in respect thereof) arise out of or are
based upon any untrue or alleged untrue statement of material fact contained in
the Registration Statement (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or arise out of or are based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made not misleading, or arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus (as amended or supplemented if Parent shall
have furnished any amendments or supplements thereto), or arise out of or are
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such Damages
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arise out of or are based upon any such untrue statement or omission based upon
information relating to such Partner furnished in writing to Parent by such
Partner expressly for use therein.
(b) INDEMNIFICATION BY THE PARTNERS. Each Partner agrees, severally and not
jointly, to indemnify and hold harmless Parent, its directors, officers and each
Person, if any, who controls Parent within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from Parent to such Partner, but only with reference to
information relating to such Partner furnished to Parent in writing by such
Partner expressly for use in the Registration Statement (or any amendment or
supplement thereto) or the Prospectus (or any amendment or supplement thereto)
and used therein as so provided; provided, however, that such Partner shall not
be obligated to provide such indemnity to the extent that such Damages result
from the failure of Parent to promptly amend or take action to correct or
supplement such Registration Statement or Prospectus on the basis of corrected
or supplemental information provided in writing by such Partner to Parent
expressly for such purpose. In no event shall the liability of any Partner of
Registrable Securities hereunder be greater in amount than the amount of the
proceeds received by such Partner upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) INDEMNIFICATION PROCEDURES. In case any proceeding (including any
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceedings and shall pay the fees and
disbursements of such counsel relating to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or (ii) the
indemnifying party fails promptly to assume the defense of such proceeding or
fails to employ counsel reasonably satisfactory to such indemnified party or
parties, or (iii) (A) the named parties to any such proceeding (including any
impleaded parties) include both such indemnified party or parties and any
indemnifying party or an Affiliate of such indemnified party or parties or of
any indemnifying party, (B) there may be one or more defenses available to such
indemnified party or parties or such Affiliate of such indemnified party or
parties that are different from or additional to those available to any
indemnifying party or such Affiliate of any indemnifying party and (C) such
indemnified party or parties shall have been advised by such counsel that there
may exist a conflict of interest between or among such indemnified party or
parties or such Affiliate of such indemnified party or parties and any
indemnifying party or such Affiliate of any indemnifying party, in which case,
if such indemnified party or parties notifies the indemnifying party or parties
in writing that it elects to employ separate counsel of its choice at the
expense of the indemnifying parties, the indemnifying parties shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the indemnifying parties, it being understood, however, that unless there exists
a conflict among indemnified parties, the indemnifying parties shall not, in
connection with any one such proceeding or separate but substantially similar or
related proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party or parties. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but, if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party or
parties from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which such indemnified party is a party, and indemnity could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
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(d) CONTRIBUTION. To the extent that the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any Damages, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Damages in such proportion as is appropriate to reflect the relative
fault of Parent on the one hand and the Partner on the other hand in connection
with the statements or omissions that resulted in such Damages, as well as any
other relevant equitable considerations. The relative fault of Parent on the one
hand and of the Partners on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by Parent or by the Partners and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
Notwithstanding the provisions of this Section 5(d), no Partner shall be
required to contribute any amount which, when added to any amounts payable by
such Partner pursuant to Section 5(b), is in excess of the amount by which the
total price at which the Registrable Securities of such Partner were sold
exceeds the amount of any Damages which such Partner has otherwise been required
to pay by reason of such untrue statement or omission. Each Partner's obligation
to contribute pursuant to this Section 5(d) is several in the proportion that
the sale proceeds received by such Partner bears to the total sale proceeds
received by all of the Partners and not joint.
Parent and each Partner agrees that it would not be just or equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
SECTION 6. MISCELLANEOUS.
(a) RULE 144. For a period of two years from the Closing Date or until such
time as the Partners and their Distributees no longer hold any Registrable
Securities, Parent shall comply with Rule 144(c) promulgated under the
Securities Act and shall make publicly available, and available to Partners,
such information as is necessary to enable Partners to sell Registrable
Securities pursuant to Rule 144 promulgated under the Securities Act.
(b) TERMINATION. This Agreement and the obligations of Parent hereunder
shall terminate on the earliest of (i) the first date on which no Partners or
their Distributees hold any Registrable Securities, and (ii) the close of
business on the last day of the Effectiveness Period, PROVIDED, HOWEVER, the
obligations of the parties pursuant to Sections 4, 5 and 6(a) hereof shall
survive such termination and continue in full force and effect notwithstanding
anything in this Agreement to the contrary.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless Parent has obtained the written consent of a Majority of Partners.
(d) NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed given:
when delivered personally; one Business Day after being deposited with a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back if telexed and when receipt is
acknowledged, if telecopied, in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice; PROVIDED that notices of a change of address shall be effective only
upon receipt thereof):
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(i) if to a holder, at the most current address given by such holder to
Parent in accordance with the provisions of this Section 6(c); and
(ii) if to Parent, initially at One RiverCenter Boulevard, 12th Floor,
Covington, Kentucky 41011, Attention: Randy Michaels, Fax: (606) 655-2267, with
a copy to Graydon, Head & Ritchey, 1900 Fifth Third Center, Cincinnati, Ohio
45202, Attention: John J. Kropp, Esq., Fax: (513) 651-3836.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties; PROVIDED
that the holders may not assign their rights hereunder except to an Affiliate of
such holder or a Distributee (as defined below) and no person (other than any
such Affiliate or Distributee) who acquires Registrable Securities from a holder
shall have any rights hereunder. For purposes of this Agreement, the term
"Distributee" shall mean any person that is a stockholder or partner of a
Partner, or any person that is a stockholder or partner of a Distributee or any
person that is a Distributee of a Distrubtee, to which Registrable Securities
are transferred or distributed by such Partner or Distributee and specifically
including those persons listed in Schedule 6(e) attached hereto. This Agreement
shall survive any transfer of Registrable Securities to a Distributee and shall
inure to the benefit of such Distributee.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO WITHOUT GIVING EFFECT TO
THE PROVISIONS THEREOF GOVERNING CONFLICT OF LAWS PRINCIPLES. ANY SUIT OR
PROCEEDING BROUGHT BY ANY PARTY TO THIS AGREEMENT RELATING TO OR ARISING OUT OF
THIS AGREEMENT OR ANY OTHER AGREEMENT, INSTRUMENT, CERTIFICATE OR OTHER DOCUMENT
DELIVERED PURSUANT HERETO (OR THE ENFORCEMENT HEREOF OR THEREOF) MUST BE BROUGHT
AND PROSECUTED AS TO ALL PARTIES IN, AND EACH OF THE PARTIES HEREBY CONSENTS TO
SERVICE OF PROCESS, PERSONAL JURISDICTION AND VENUE IN, THE STATE AND FEDERAL
COURTS OF GENERAL JURISDICTION LOCATED IN HAMILTON COUNTY.
(i) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants, and restrictions without including any of such that may
be hereafter declared invalid, illegal, void, or unenforceable.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties, or
undertakings, other than those set forth or referred to herein, with respect to
the registration rights granted by Parent with respect to the Registrable
Securities issued pursuant to the Asset Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) CALCULATION OF TIME PERIODS. Except as otherwise indicated, all periods
of time referred to herein shall include all Saturdays, Sundays and holidays;
PROVIDED, that if the date to perform the
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act or give any notice with respect to this Agreement shall fall on a day other
than a Business Day, such act or notice may be timely performed or given if
performed or given on the next succeeding Business Day.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
JACOR COMMUNICATIONS, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
JACOR BROADCASTING CORPORATION
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
SECRET COMMUNICATIONS LIMITED PARTNERSHIP
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
PARTNERS
[To be added]
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS/INFORMATION STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Jacor, being incorporated under the General Corporation Law of the State of
Delaware, is empowered by Section 145 of such law ("Statute"), subject to the
procedures and limitations stated in the Statute, to indemnify any person
("Indemnitee") against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
Indemnitee in connection with any threatened, pending or completed action, suit
or proceeding to which an Indemnitee is made a party or threatened to be made a
party by reason of the Indemnitee's being or having been a director, officer,
employee or agent of Jacor or a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise at the
request of Jacor. The Statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. The Statute also provides that Jacor may
purchase insurance on behalf of any director, officer, employee or agent.
Article Sixth of Jacor's Certificate of Incorporation contains provisions
permitted by Section 102 of the General Corporation Law of the State of Delaware
which eliminate personal liability of members of its board of directors for
violations of their fiduciary duty of care. Neither the Delaware General
Corporation Law nor the Certificate of Incorporation, however, limits the
liability of a director for breaching such director's duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly violating
a law, paying a dividend or approving a stock repurchase under circumstances
where such payment or repurchase is not permitted under the Statute, or
obtaining an improper personal benefit.
Article 8 of Jacor's Bylaws provides that Jacor is obligated to indemnify an
Indemnitee in each and every situation where Jacor is obligated to make such
indemnification pursuant to the Statute. Jacor must also indemnify an Indemnitee
in each and every situation where, under the Statute, Jacor is not obligated but
is nevertheless permitted or empowered to make such indemnification. However,
before making such indemnification with respect to any situation covered by the
preceding sentence, (i) Jacor shall promptly make or cause to be made, by any of
the methods referred to in subsection (d) of the Statute, a determination as to
whether the Indemnitee acted in good faith and in a manner such indemnitee
reasonably believed to be in or not opposed to the best interests of Jacor, and,
in the case of any criminal action or proceeding, had no reasonable cause to
believe that such Indemnitee's conduct was unlawful and (ii) no such
indemnification shall be made unless it is determined that such Indemnitee acted
in good faith and in a manner such Indemnitee reasonably believed to be in or
not opposed to the best interests of Jacor, and, in the case of any criminal
action or proceeding, had no reasonable cause to believe that such Indemnitee's
conduct was unlawful.
Pursuant to authority contained in its Bylaws, Jacor maintains in force a
standard directors' and officers' liability insurance policy providing a
coverage of $10,000,000 against liability incurred by any director or officer in
his or her capacity as such.
The preceding discussion of the Statute and Jacor's Certificate of
Incorporation and Bylaws is not intended to be exhaustive and is qualified in
its entirety by reference to the complete texts of Jacor's Certificate of
Incorporation and Bylaws and to the Statute.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See Index to Exhibits.
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ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any Prospectus/Information Statement required by
section 10(a)(3) of the Securities Act;
(ii) To reflect in the Prospectus/Information Statement any facts or
events arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
Prospectus/Information Statement filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
Prospectus/Information Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a Prospectus/Information Statement which is part of
this registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering Prospectus/Information Statement will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(6) That every Prospectus/Information Statement (i) that is filed
pursuant to paragraph (5), or (ii) purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
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<PAGE>
(7) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described under Item 20
above, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the Prospectus/ Information Statement pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involves therein,
that was not the subject of and included in the registration statement when
it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati, State of Ohio
on this 18th day of July, 1997.
JACOR COMMUNICATIONS, INC.
By: /s/ R. CHRISTOPHER WEBER
-----------------------------------------
R. Christopher Weber
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND ASSISTANT SECRETARY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints R. Christopher Weber, Jon M. Berry and
Paul F. Solomon, or any of them, as such signatory's true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for such signatory and in such signatory's name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully as to
all intents and purposes as such signatory might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 18, 1997 by the following persons
in the capacities indicated.
<TABLE>
<S> <C>
Principal Executive Officer: Principal Financial and Accounting Officer:
/s/ RANDY MICHAELS /s/ R. CHRISTOPHER WEBER
- -------------------------------------------- --------------------------------------------
Randy Michaels R. Christopher Weber
CHIEF EXECUTIVE OFFICER AND DIRECTOR SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
AND ASSISTANT SECRETARY
/s/ ROBERT L. LAWRENCE /s/ ROD F. DAMMEYER
- -------------------------------------------- --------------------------------------------
Robert L. Lawrence Rod F. Dammeyer
PRESIDENT, CHIEF OPERATING OFFICER, AND DIRECTOR
DIRECTOR
/s/ SHELI Z. ROSENBERG /s/ F. PHILIP HANDY
- -------------------------------------------- --------------------------------------------
Sheli Z. Rosenberg F. Philip Handy
VICE CHAIRMAN AND DIRECTOR DIRECTOR
/s/ JOHN W. ALEXANDER /s/ MARC LASRY
- -------------------------------------------- --------------------------------------------
John W. Alexander Marc Lasry
DIRECTOR DIRECTOR
/s/ PETER C.B. BYNOE /s/ MAGGIE WILDEROTTER
- -------------------------------------------- --------------------------------------------
Peter C.B. Bynoe Maggie Wilderotter
DIRECTOR DIRECTOR
/s/ SAMUEL ZELL
- --------------------------------------------
Samuel Zell
CHAIRMAN OF THE BOARD AND DIRECTOR
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated February 12, 1996 among Citicasters Inc. ("Citicasters"), Jacor
Communications, Inc. ("Jacor") and JCAC, Inc. Incorporated by reference to Exhibit 2.1 to Jacor's
Current Report on Form 8-K dated February 27, 1996.
2.2 Warrant Agreement dated as of September 18, 1996 between Jacor and KeyCorp Shareholder Services, Inc.,
as warrant agent. Incorporated by reference to Exhibit 4.1 to Jacor's Current Report on Form 8-K dated
October 3, 1996.
2.3 Supplemental Agreement dated as of September 18, 1996 between Jacor and KeyCorp Shareholder Services,
Inc., as warrant agent. Incorporated by reference to Exhibit 4.2 of Jacor's Current Report on Form 8-K
dated October 3, 1996.
2.4 Registration Rights Agreement dated as of August 5, 1996 among Jacor, JCAC, Inc., Great American
Insurance Company, American Financial Corporation, American Financial Enterprises, Inc., Carl H.
Lindner, The Carl H. Lindner Foundation, and S. Craig Lindner. Incorporated by reference to Exhibit
2.22 to Jacor's Post-Effective Amendment No. 1 on Form S-3 to Form S-4 (File No. 333-6639).
2.5 Stock Purchase and Stock Warrant Redemption Agreement dated as of February 20, 1996 among Jacor,
Prudential Venture Partners II, L.P., Northeast Ventures, II, John T. Lynch, Frank A. DeFrancesco,
Thomas R. Jiminez, William R. Arbenz, CIHC, Incorporated, Bankers Life Holding Corporation and Noble
Broadcast Group, Inc. ("Noble") (omitting exhibits not deemed material or filed separately in executed
form). [Prudential and Northeast are sometimes referred to hereafter as the "Class A Stockholders";
Lynch, DeFrancesco, Jiminez and Arbenz as the "Class B Stockholders"; and CHIC and Bankers Life as the
Warrant Sellers.] Incorporated by reference to Exhibit 2.1 to Jacor's Current Report on Form 8-K dated
March 6, 1996, as amended.
2.6 Investment Agreement dated as of February 20, 1996, among Jacor, Noble and the Class B Stockholders
(omitting exhibits not deemed material). Incorporated by reference to Exhibit 2.2 to Jacor's Current
Report on Form 8-K dated March 6, 1996, as amended.
2.7 Asset Exchange Agreement dated as of September 26, 1996 between Citicasters Co. and Pacific and
Southern Company, Inc. (omitting schedules and exhibits not deemed material). Incorporated by reference
to Exhibit 2.1 to Jacor's Current Report on Form 8-K dated October 11, 1996.
2.8 Agreement and Plan of Merger dated as of October 8, 1996 ("Regent Merger Agreement") between Jacor and
Regent Communications, Inc. (omitting schedules and exhibits not deemed material). Incorporated by
reference to Exhibit 2.1 to Jacor's Current Report on Form 8-K dated October 23, 1996.
2.9 Form of Warrant Agreement between Jacor and KeyCorp Shareholder Services, Inc., as warrant agent
(included as Exhibit B to Regent Merger Agreement). Incorporated by reference to Exhibit 2.2 to Jacor's
Current Report on Form 8-K dated October 23, 1996.
2.10 Registration Rights Agreement dated as of October 8, 1996 among Jacor and the parties listed in
Schedule I thereto (included as Exhibit I to Regent Merger Agreement). Incorporated by reference to
Exhibit 2.4 to Jacor's Current Report on Form 8-K dated October 23, 1996.
2.11 Form of Plan and Agreement of Merger between Jacor and New Jacor, Inc. Incorporated by reference to
Annex VII to the Proxy Statement/Information Statement/Prospectus to Jacor's Form S-4 Registration
Statement (File No. 333-6639).
2.12 Asset Purchase Agreement dated as of March 17, 1997 among Jacor Communications Company ("JCC"), EFM
Programming, Inc., EFM Media Management, Inc., EFM Publishing, Inc. and PAM Media, Inc. Incorporated by
reference to Exhibit 2.1 to Jacor's Current Report on Form 8-K dated March 21, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
2.13 Agreement and Plan of Merger dated as of April 7, 1997 among Jacor, JCC, PRN Holding Acquisition Corp.
and Premiere Radio Networks, Inc. (omitting schedules and exhibits not deemed material). Incorporated
by reference to Exhibit 2.1 to Jacor's Current Report on Form 8-K dated April 8, 1997.
2.14 Shareholders' Agreement dated as of April 7, 1997 by and among Jacor, JCC, Archon Communications, Inc.
("Archon"), the stockholders of Archon and certain shareholders of Premiere (omitting schedules and
exhibits not deemed material). Incorporated by reference to Exhibit 2.2 to Jacor's Current Report on
Form 8-K dated April 8, 1997.
2.15 Stock Purchase Agreement dated as of April 7, 1997 among Jacor, JCC, Archon Communications Partners LLC
and News America Holdings Incorporated (omitting schedules and exhibits not deemed material).
Incorporated by reference to Exhibit 2.3 to Jacor's Current Report on Form 8-K dated April 8, 1997.
2.16 Purchase Agreement dated June 11, 1997, by and among JCC, the Company, the Subsidiary Guarantors named
therein, Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. Incorporated by reference to Exhibit 2.1 to Jacor's Current Report
on Form 8-K dated June 26, 1997 as amended.
2.17 Registration Rights Agreement dated June 17, 1997 among JCC, Jacor, the Subsidiary Guarantors named
therein, Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. Incorporated by reference to Exhibit 4.2 to Jacor's Current Report
on Form 8-K dated June 26, 1997, as amended.
4.1 Form of Indenture. Incorporated by reference to Exhibit 4.1 to Jacor's Form S-3 Registration Statement
(File No. 333-19291).
4.2 Indenture dated as of June 12, 1996 between Jacor and The Bank of New York for Jacor's Liquid Yield
Option Notes Due 2011. Incorporated by reference to Exhibit 4.23 to Jacor's Form S-4 Registration
Statement (File No. 333-6639).
4.3 Indenture dated as of June 12, 1996 among Jacor, JCAC, Inc. and First Trust of Illinois, National
Association for JCAC, Inc.'s 10 1/8% Senior Subordinated Notes due 2006 and Jacor's Guaranty thereof.
Incorporated by reference to Exhibit 4.24 to Jacor's Form S-4 Registration Statement (File No.
333-6639).
4.4 Effectiveness Agreement dated as of February 14, 1997 among JCC, the Lenders named therein (the
"Lenders"), The Chase Manhattan Bank, as Administrative Agent, Banque Paribas, as Documentation Agent,
and Bank of America Illinois, as Syndication Agent (omitting schedules and exhibits not deemed
material).
4.5 Credit Agreement dated as of June 12, 1996 as amended and restated as of February 14, 1997 ("Credit
Agreement") among JCC, the Lenders, Bank of America Illinois, as Syndication Agent, Banque Paribas, as
Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (omitting schedules and
exhibits not deemed material) (included as Exhibit A to Effectiveness Agreement).
4.6 Security Agreement dated as of June 12, 1996 by and between JCAC, Inc. and Chemical Bank as
Administrative Agent. Incorporated by reference to Exhibit 4.28 to Jacor's Form S-4 Registration
Statement (File No. 333-6639).
4.7 Parent Guaranty dated as of June 12, 1996 by Jacor in favor of Chemical Bank, as Administrative Agent,
for the Lenders and any Interest Rate Hedge Providers (as defined in the Credit Agreement).
Incorporated by reference to Exhibit 4.29 to Jacor's Form S-4 Registration Statement (File No.
333-6639).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
4.8 Pledge Agreement dated as of June 12, 1996 by and between Jacor and Chemical Bank, as Administrative
Agent for the Agents (as defined in the Credit Agreement), the Lenders and any Interest Rate Hedge
Providers. Incorporated by reference to Exhibit 4.30 to Jacor's Form S-4 Registration Statement (File
No. 333-6639).
4.9 Indenture dated as of December 17, 1996 among JCC, Jacor, the Subsidiary Guarantors named therein (the
"Subsidiary Guarantors") and the Bank of New York for JCC's 9 3/4% Senior Subordinated Notes due 2006
and Jacor's and the Subsidiary Guarantors' Guaranty thereof. Incorporated by reference to Exhibit 4.9
to Jacor's Form S-3 Registration Statement (File No. 333-19291).
4.10 Form of Deposit Agreement. Incorporated by reference to Exhibit 4.11 to Jacor's Form S-3 Registration
Statement (File No. 333-19291).
4.11 Stock Option Agreement dated as of June 23, 1993 between Jacor and Rod F. Dammeyer covering 10,000
shares of Jacor's common stock. (1) Incorporated by reference to Exhibit 4.3 to Jacor's Quarterly
Report on Form 10-Q dated August 13, 1993.
4.12 Stock Option Agreement dated as of December 15, 1994 between Jacor and Rod F. Dammeyer covering 5,000
shares of Jacor's common stock. (2) Incorporated by reference to Exhibit 4.23 to Jacor's Quarterly
Report on Form 10-Q dated August 13, 1993.
4.13 Indenture dated as of June 17, 1997 among JCC, Jacor, the Subsidiary Guarantors named therein (the
"Subsidiary Guarantors") and the Bank of New York for JCC's 8 3/4% Senior Subordinated Notes due 2007
and Jacor's and the Subsidiary Guarantors' Guaranty thereof. Incorporated by reference to Exhibit 4.1
to Jacor's Current Report on Form 8-K dated June 26, 1997, as amended.
5.1 Opinion of Graydon, Head & Ritchey.
10.1(+) Employment Agreement dated February 20, 1996 by and between Noble Broadcast Group, Inc. and John T.
Lynch, as assumed by Jacor effective July 15, 1996. Incorporated by reference to Exhibit 10.1 to
Jacor's Quarterly Report on Form 10-Q dated November 14, 1996, as amended.
10.2(+) Employment Agreement dated February 20, 1996 by and between Noble Broadcast Group, Inc. and Frank A.
DeFranceso, assumed by Jacor effective July 15, 1996. Incorporated by reference to Exhibit 10.2 to
Jacor's Quarterly Report on Form 10-Q dated November 14, 1996, as amended.
10.3(+) Jacor Communications, Inc. 1993 Stock Option Plan. Incorporated by reference to Exhibit 99 to Jacor's
Quarterly Report on Form 10-Q dated August 13, 1993.
10.4(+) Jacor Communications, Inc. 1995 Employee Stock Purchase Plan. Incorporated by reference to Exhibit 4.01
to Jacor's Registration Statement on Form S-8, filed on November 9, 1994.
10.5(+) Jacor Communications, Inc. Executive Stock Unit Plan effective as of November 7, 1996. Incorporated by
reference to Exhibit 10.5 to Jacor's Annual Report on Form 10-K for the year ended December 31, 1996.
10.6(+) Jacor Communications, Inc. 1996 Non-Employee Directors Stock Units. Incorporated by reference to
Exhibit 10.6 to Jacor's Annual Report on Form 10-K for the year ended December 31, 1996.
11.1 Statement re: computation of per share earnings. Incorporated by reference to Exhibit 11 to Jacor's
Annual Report on Form 10-K for the year ended December 31, 1996.
12.1 Computation of Ratio of Earnings to Fixed Charges. Incorporated by reference to Exhibit 12.1 to Jacor's
Form S-3 Registration Statement (File No. 333-19291).
21.1 Subsidiaries of Jacor. Incorporated by reference to Exhibit 21 to Jacor's Annual Report on Form 10-K
for the year ended December 31, 1996.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Arthur Andersen LLP.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
23.4 Consent of Graydon, Head & Ritchey (included in opinion of counsel filed as Exhibit 5.1).
24.1 Powers of Attorney of directors and officers signing this Registration Statement are part of the
Signature Pages.
</TABLE>
- ------------------------
(1) Identical documents were entered into with John W. Alexander, F. Philip
Handy and Marc Lasry.
(2) Identical documents were entered into with John W. Alexander, F. Philip
Handy, Marc Lasry and Sheli Z. Rosenberg. An additional grant of 5,000
stock options was made to each of these five individuals in February 1996
pursuant to substantially identical documents.
(+) Management Contracts and Compensatory Arrangements.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD]
July 18, 1997
Jacor Communications, Inc.
50 East RiverCenter Boulevard
12th Floor
Covington, KY 41011
Re: Issuance of 750,000 Shares of Common Stock of Jacor
Communications, Inc. Pursuant to Registration Statement on Form
S-4 Filed with the Securities and Exchange Commission
----------------------------------------------------------------
Gentlemen:
We have acted as counsel to Jacor Communications, Inc., a Delaware
corporation ("Company"), in connection with the issuance of 750,000 Shares of
Common Stock pursuant to the purchase of certain assets of Secret
Communications Limited Partnership by Jacor Broadcasting Corporation, a
wholly owned subsidiary of the Company, as set forth in the Form S-4
Registration Statement filed by the Company with the Securities and Exchange
Commission.
As counsel for the Company we have made such legal and factual
examinations and inquiries as we deem advisable for the purpose of rendering
this opinion. In addition, we have examined such documents and materials,
including the Certificate of Incorporation, Bylaws, and other corporate
records of the Company, as we have deemed necessary for the purpose of this
opinion.
On the basis of the foregoing, we express the opinion that the
750,000 Shares of Common Stock of the Company registered for issuance
pursuant to the Registration Statement are currently validly authorized and,
when issued as contemplated by the Registration Statement, will be legally
issued, fully paid and nonassessable shares of Common Stock of the Company.
<PAGE>
Jacor Communications, Inc.
Page 2
July 18, 1997
We hereby consent to the filing of this opinion as part of the
above-referenced Registration Statement and amendments thereto and to the
reference to our firm in the Prospectus/Information Statement under the
caption "Legal Matters."
Very truly yours,
GRAYDON, HEAD & RITCHEY
By: /s/ Richard G. Schmalzl
-------------------------------
Richard G. Schmalzl, Partner
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 of
our report dated February 27, 1997 on our audits of the consolidated financial
statements of Jacor Communications, Inc. as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996, and of our
report dated February 28, 1997, on our audits of the combined financial
statements of EFM Media Management, Inc., EFM Publishing, Inc., and PAM Media,
Inc. as of December 31, 1995 and 1996 and for each of the three years in the
period ended December 31, 1996. We also consent to the reference to our firm
under the captions "Selected Historical Financial Data" and "Experts."
COOPERS & LYBRAND L.L.P.
Cincinnati, Ohio
July 18, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 21, 1997, with respect to the consolidated
financial statements of Premiere Radio Networks, Inc. included in the
Registration Statement (Form S-4) and related Prospectus of Jacor
Communications, Inc./Information Statement of Secret Communications Limited
Partnership.
ERNST & YOUNG LLP
Los Angeles, California
July 18, 1997
